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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 2009/10 (red
figures) the Chancellor announced the
following changes (subject to becoming law in the Finance
Act)
08/09
09/10
People under
65
£6035 £6475
Age 65 - 74 and total income
below £21800, £22900
£9030
£9490
Age 75 and over with total income
below
£21800,
£22900 £9180
£9640
Married Couples Allowance where
Husband or wife born before
6/4/1935 but under 75 - 08/09 £6535, 09/10 £6865 but only allowed as a
10% reduction to tax and on income below, 08/09 £21800,
09/10 £22900.
Married Couples Allowance where Husband or wife 75 or
over 08/09 £6625, 09/10
£6965, but only allowed as a 10% reduction to tax and on
income below 08/09 £21800, 09/10 £22900.
Blind Persons Allowance 08/09 £1800, 09/10
£1890.
E What are the tax bands?
08/09
09/10
£0 - £34800 20%
£0 - £37400
20%
0ver £34800
40%
Over £37400 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 08/09 £9030,
09/10 £9490 before paying tax at 20%
and over £40835, 09/10 £43875
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. 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 were born before
6 April 1935 and you were married before 6 April 2000
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 08/09 £21800, 09/10 £22900 wh
en it is reduced by £1 for every
£2 of income over the threshold until the allowance is equal to
the basic personal allowance 08/09 £6035,
09/10 £6475.
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 08/09 £2320, 09/10 £2440
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.
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 £15000, ring
the TaxHelp for Older People helpline 0845 601 3321 or 01308 488066.
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