National Insurance and Tax after State Pension age

National Insurance and Tax after State Pension age

This blog provides an overview of what happens to national insurance and tax after a person reaches state pension age and is based on information obtained from the HMRC web site https://www.gov.uk/tax-national-insurance-after-state-pension-age.

You do not pay national insurance after you reach state pension age unless you are self employed and are paying class 4 contributions.

In addition, you only pay income tax if your taxable income (including your private and state pension) is more than your tax free allowance. This is the amount of income you are allowed before you pay tax.

You pay National Insurance contributions to qualify for certain benefits including the state pension. If you are employed, you pay class 1 NI contributions as a percentage of your earnings up to state pension age. If you are self employed, you pay class 2 contributions at a flat weekly rate and class 4 contributions annually as a percentage of taxable profits.

What happens at State Pension age?

At state pension age:-

  • You stop paying class 1 and 2 contributions even if you still work
  • You still have to pay class 4 contributions if you have taxable profits from the year you reach state pension age

What happens if you continue working?

You should show your employer proof of your age to make sure you stop paying National Insurance. If you do not want to show your employer your passport or birth certificate, HMRC can send you a letter to show them instead. You will need to write to HMRC explaining why you do not want your employer to see them.

Married Couples Allowance

You can claim the Married Couple’s Allowance if you are married or in a civil partnership. In order to qualify, at least one partner was born before 6th April 1935. It will be taken from your tax bill though the amount deducted will depend on your income.

Maintenance Payments Relief

It is possible that you can receive an allowance to reduce your tax bill for maintenance payments you make to an ex-spouse or civil partner if:-

  • You or they were born before 6th April 1935
  • You are separated or divorced and you are making payments under a court order
  • The payments are for the maintenance of your ex-partner. This applies as long as they have not remarried or formed a new civil partnership. It also applies if your children are under 21

How much do you receive?

For the 2017/18 tax year, Maintenance Payments Relief can reduce your tax bill by the lower of the following:-

  • £326 – when you make maintenance payments of £3,260 or more per year
  • 10% of the money you have actually paid – when you make maintenance payments of less than £3,260 per year

You cannot claim a tax deduction for any voluntary payments that you make.

Claiming back Tax or National Insurance

You can claim back any overpaid National Insurance. You can claim a tax refund if you have had too much tax deducted from your pension or overpaid tax through your job. If you complete a tax return, you can also correct mistakes and claim a refund through self assessment.

For further information please contact Stallion Accountancy Services.

About the author...

George Greer is an experienced ACCA qualified Business Owner with a demonstrated history of working in the accounting industry. He is skilled in Accounts and Finance Management, Budgeting and Business Planning with excellent knowledge of Sage and Xero Products. Strong professional with a BSc focused in Business Computing Systems from City University London.

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