HMRC alert issued for anyone working beyond State Pension age | Retirement | Finance

HMRC has issued a tax update for state pensioners who want to continue working. The Government explained how tax and National Insurance works when retirees draw a state pension income, which is worth up to £965.20 every four weeks.

April’s 4.8% increase to the State Pension has brought the annual payments close to the tax-free personal allowance of £12,570, which is the amount someone can earn before paying tax. So the Government urged pensioners to watch its Q&A video to understand what to do if they are pushed over the limit. Taking to X, HMRC said: “Our Q&A is here to help you understand your options, from working alongside a pension to changes in National Insurance. Find out more at Tax Confident and feel confident about tax in retirement.”

Importantly, once someone reaches State Pension age, which is currently 66, they no longer pay National Insurance on earnings from employment or self-employment.

However, Income Tax still applies over the standard Personal Allowance of £12,570. This could happen if wages, workplace or private pensions, interest on savings, investments or rented properties push you over the limit.

The tax can be collected through ‘Pay As You Earn‘ (PAYE) system if you are employed. If you get a workplace or private pension on top of your wages, HMRC will usually change your tax code, so the right amount of tax is taken by your employer and pension provider.

If you’re self-employed, you’ll have to list all your income – including any workplace or private pensions – on a tax return.

The taxman said: “No one wants to spend their retirement worrying about tax. Whether you’ve just retired or you’re planning ahead, we’re here to help you understand how tax works at this stage of your life.

“When you retire, tax can feel a bit different. For a start, the money you get might be coming from several places – a pension, interest from savings, or perhaps some self-employed work.

“The good news is that the basics are simple once you know them. Watch this short video or read on to find out what topics we can help with.”