| Frequently Asked Questions:
E
Is my state pension
taxable?
Yes, it is. However, there is no
mechanism to deduct tax due at source so those pensioners with
occupational pensions have their personal tax allowance reduced by
the amount of the state pension so that the tax due on both sources
is all deducted from the occupational pension.
If your state pension exceeds your
personal tax allowance but you do not have any other source of
income, then HM Revenue & Customs (HMRC) will collect
the tax in a lump sum through the self assessment
system.
E
What are my allowances?
For 2010/11, 2011/12 (red figures) the Chancellor announced the
following changes (subject to becoming law in the Finance
Act)
10/11 11/12
People under
65
£6475 £7475
Age 65 - 74 and total income
below £22900, £24000
£9490
£9940
Age 75 and over with total income
below £22900, £24000 £9640
£10,090
Married Couples Allowance where Husband
or wife 75 or over 10/11 £6965, 11/12
£7295, but only allowed as a 10% reduction to tax and on
income below 10/11 £22900, 11/12
£24000.
Blind Persons Allowance 10/11 £1890,
11/12 £1980.
E What are the tax bands?
10/11
11/12
£0 - £37400 20%
£0 - £35000 20%
0ver £37400
40%
Over £35000 40%
Remember, these rates apply to TAXABLE income so that is over and
above your personal allowance. For example, a pensioner aged 69
would have to have income of
over 10/11 £9490, 11/12
£9940 before paying tax at 20% and over £43875, 11/12 £42475 before paying at
40%
E Can I transfer my
allowances?
No, not the personal allowance. 50% of
the married couple’s allowance can be transferred, or the balance of
any unused married couple’s allowance. This can be useful if you are
not able to use all of the allowance but your spouse can. The
blind person’s allowance is also transferable between
spouses.
E
Is attendance allowance
taxable?
No, it isn’t.
E Are Pension Credits taxable?
No, they are not taxable
E
Am I entitled to MCA?
Yes, if you or your wife, or partner if
you are in a civil partnership were born before 6 April 1935.
HMRC will need certain details so make sure you have them to hand.
Wife/civil partner's national insurance number, date of birth
and the date of marriage.
E I am retired but
not yet 65, can I claim age Allowance?
No, the allowance is only available in
the tax year in which you become 65 and beyond. The entitlement to
the allowance is based on age, not personal circumstance, unless
your income exceeds 10/11 £22900, 11/12 £24000 when it is reduced by £1
for every £2 of income over the threshold until the allowance is
equal to the basic personal allowance 10/11 £6475, 11/12 £7475.
E
Am I entitled to the 10% band on my
savings interest?
If your income (not including income from
savings) is below, the same as, or within 10/11 £2440, 11/12 £2560 of your personal
allowance you will be eligible for all or part of it. The
savings provider will take 20% tax at source as
normal and then you claim the overpayment back at the end of
the tax year using a form R40.
E How much can I
give away each year?
You can give a total of £3000 without any
Inheritance Tax implications, in addition £5000 if it is a wedding
present to a child, £2500 to a grandchild getting married or
£1000 to any other person on their marriage.
If you did not use the £3000 exemption
the previous year it can be aggregated with the current year. This
only applies for one year so £6000 is the maximum.
Apart from this you may give as many
small gifts as you wish, provided they do not total more than
£250 per person
Also, you may give larger sums than all
those mentioned above but you would need to survive 7 years from the
date of the gift for it not to be included in the calculation of
your estate.
Another useful exemption is 'normal
expenditure out of income' Lifetime gifts are exempt if they are
part of the donor's normal ependiture, made out of income and the
donor is left with sufficient income to maintain his or her usual
standard of living.
E
If I sell my house do I have to pay
Capital Gains Tax?
If your house is your home and you have
always lived in it, then you do not have to pay Capital Gains
Tax.
E
Can I give my house to my children
and continue to live in it and avoid inheritance tax?
Basically, no. It is possible if you pay
a full market rent for your home but then your children are taxable
on the rent received. There are very complicated schemes around to
avoid inheritance tax on the family home but you should consult a
tax specialist and a solicitor before embarking on
them.
E
Why have I received a tax
return?
The HMRC issue returns to people who have
untaxed sources of income. This may be your state pension as it
cannot be taxed at source, see question 1. However, if you are in
doubt as to why it has been issued, phone your tax office or, if
your household income is below £17000, ring the TaxHelp for Older
People helpline 0845 601 3321 or 01308 488066.
E How long does
it take to obtain my Online Filing
Password?
If you are thinking of filing an online
self assessment you need to make sure you leave time to obtain your
activation PIN. It can take up to 7 days so needs to be applied for
before the 21st January. The best advice we can offer is to complete
your return as soon as you get it.
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