HMRC issues rules for pensioners with multiple incomes | Retirement | Finance

British pensioners juggling two incomes have been issued an update by HM Revenue & Customs (HMRC) regarding tax rules for working during retirement. As the State Pension age rises from 66 to 67 between April 2026 and March 2028, many retirees are opting to stay in the workforce to boost their bank balances. But having two incomes – drawing a pension while also earning a wage or running a business – can easily lead to a confusing tax trap. As part of a newly launched Tax Confident campaign, HMRC has stepped in to clarify exactly where older Britons stand on their National Insurance and Income Tax bills.

The good news is that once you reach State Pension age, your National Insurance (NI) contributions stop. If you are employed, your boss will no longer deduct NI from your wages. To trigger this, you simply need to prove your age using a passport, birth certificate, or a State Pension award letter.

Self-employed workers get a slightly different deal. You will stop paying all NI contributions from the start of the new tax year (April 6) after your State Pension age birthday. HMRC urges self-employed Britons to ensure their date of birth is correctly listed on their tax return so the payments cease automatically.

However, while NI halts, Income Tax certainly does not. Every Briton gets a standard tax-free Personal Allowance – the amount you can earn before handing a penny over to the taxman. Currently, this sits at £12,570 a year.

Crucially, your State Pension counts towards this total. While your State Pension is paid out without any tax deducted at source, HMRC adds it to your wages, workplace pensions, savings interest, or rental income to calculate your total earnings.

If your combined income breaches the £12,570 threshold, you must pay Income Tax on everything above it.

For employed workers claiming a private pension, HMRC will adjust your tax code so your employer and pension provider deduct the correct amount via Pay As You Earn (PAYE). Meanwhile, self-employed pensioners must declare all income sources on their annual Self Assessment return.

With the rules laid bare, HMRC is urging older Britons to check their tax codes and ensure they are not caught out by an unexpected bill in their golden years.