Tax on the state pension
The state pension is taxable but unlike private pensions, the state pension has no tax deducted at source before it is paid to you. Here we look at what tax is payable on state pension payments.
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The state pension is taxable. However, you receive your state pension gross, with no tax taken off. If your income, including your state pension, is less than your tax-free allowances, you probably do not need to pay any tax at all. But if your income, including your state pension and any other pensions, is more than your tax-free allowances you may need to pay some tax.
The state pension is taxed on an accruals basis. This means that the amount which is taxable might not be exactly the same as the amount received, which is explained further in the section ‘Taxable state pension payments’, below.
NOTE: you do not get a form P60 after the end of each tax year for your state pension, so you must keep your own records of your state pension income.
How the state pension is taxed
If you receive a state pension and also receive income from another source of income taxed under Pay As You Earn (PAYE) for example a private pension scheme, the tax due on your state pension is likely to be collected under PAYE for your other pension if it is large enough. This may make the tax seem high on your other pension, but this is because HM Revenue & Customs (HMRC) collect tax on two pensions from the one source of income. We discuss this more on our page How tax is collected on the state pension.
To help avoid any problems with tax on your pensions, you should tell HMRC whenever you receive a new pension or other source of income.
If you are thinking of retiring abroad, read our information on how your state pension will be taxed and about increases in state pension when you are living abroad.
If you put off claiming your state pension, there is more information on our pages Putting off (deferring) claiming the state pension and Tax on deferred state pension lump sums.
Always keep any Department of Work and Pensions paperwork you are sent which tells you what your weekly amount of state pension will be for any tax year, as you will find this useful if you need to check your PAYE coding notice, complete a tax return, check a tax calculation sent to you by HMRC or make a repayment claim.
Taxable state pension payments
The amount of state pension you pay tax on in a year is the amount that you are due to receive in the year.
This is often not the same as the amount you actually receive, as you are likely to have your state pension paid to you four-weekly.
You might need to do some sums to get to the right taxable amount, as you do not get a P60 for the state pension after the end of the tax year. To do this, you should refer to letters you receive from the Department of Work and Pensions (usually before the start of the tax year) telling you how much your weekly amount of state pension is. You will then have to count how many weekly payments you would have received in the tax year if you had it paid weekly and multiply this by the weekly sum. Sometimes, depending on how the dates fall, you might have to add, say, 51 weeks at one amount to 1 week at a different amount to make up the full tax year.
If you only started to receive the state pension part way through a year, you will need to count the weeks from the date you were due to start receiving it. This reverse would be true if you are dealing with the affairs of someone who died during the tax year – you would need to count the weeks from the start of the tax year in which they died up to the date of death.
If you have another source of income which is taxed under PAYE, such as an occupational pension, then you might find the taxable figure for your state pension in your tax code for that source of income. Alternatively, you can contact HMRC to ask them the correct figure.
Non-taxable payments connected to state pension
Note that the winter fuel payment and Christmas bonus, also paid by the Department for Work and Pensions, are both tax free. Be careful not to include these amounts as part of your taxable state pension amount. Child dependency additions paid with state pension are tax free. Pension credit is also a tax-free state benefit and does not need to be declared.
Backdated state pension claims
You can backdate a claim to the state pension by up to 12 months. So if, for example, you reach state pension age on 1 October 2023 but do not claim it at that time, up to 30 September 2024 you can still backdate your claim as if you had originally made it at 1 October 2023.
In such cases, the state pension will be taxed in the year it would have been paid, had the claim been made at the appropriate time. Therefore, using 1 October 2023 as in the above example, any state pension that would have been due to be paid to you between 1 October 2023 and 5 April 2024 will be taxable in the 2023/24 tax year. Any amount due from 6 April 2024 will then be taxable in 2024/25.
This is effectively just a catch-up payment of the state pension you would have been due to receive if you had claimed it earlier, so there is no special tax treatment in this situation. This is different to where you defer your state pension.