Older workers ‘may be paying unnecessary tax on State Pension’, research suggests
Research carried out by insurer Royal London has suggested that half a million older workers could be ‘paying unnecessary tax’ on their State Pension.
Royal London stated that this is because older workers have ‘failed to take up the option of deferring their State Pension until they stop work’. Consequently, the whole of their State Pension is taxed.
The research revealed that, in 2017, 1.1 million people aged 65 or over were working. 950,000 of these individuals were combining paid work with taking a State Pension.
According to Royal London, 520,000 individuals were ‘earning enough to take them over the tax threshold’, meaning that the entirety of their State Pension was taxed.
‘There has been a huge increase in the number of people working past the age of 65, and this research finds that most of these people are claiming their State Pension as soon as it is available,’ said Steve Webb, Director of Policy at Royal London.
For around half a million workers, this means every penny of their State Pension is being taxed, in some cases at the higher rate.
If their earnings are enough to support them, it makes sense to consider deferring taking a State Pension so that less of their pension disappears in tax.
As your accountants, we can help you to minimise your tax liability. For more information, please contact us.