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Where Taxpayers and Advisers Meet

State pension arrears

Posts: 101
Joined: Wed Aug 06, 2008 3:31 pm

State pension arrears

Postby Brightonian » Mon Nov 07, 2011 3:43 pm

If someone claims their pension late and receives the arrears after the end of the tax year, are they taxed in the year that the pension relates to or the year in which it was paid?

Posts: 7877
Joined: Wed Aug 06, 2008 3:25 pm

Re: State pension arrears

Postby maths » Mon Nov 07, 2011 4:56 pm

Not sure what you mean by "claims their pension late" ?

It is possible to defer a State Pension; if this is done then no income tax liability arises until the pension is drawn following the deferral.

Posts: 418
Joined: Wed Feb 03, 2010 4:40 pm

Re: State pension arrears

Postby JRG » Mon Nov 07, 2011 6:21 pm

Maggiefleming: The State Pension (and most other income) is taxed in the Tax year it is actually received.

Maths: If you don't claim your State Pension until after it was due to begin then you've "claimed your pension late".

FYI, from the Directgov website:

Claiming your State Pension
The Pension Service should automatically send you a State Pension Information Booklet and invite you to claim four months before you reach State Pension age.

If you haven't received this booklet three months before you reach State Pension age, the quickest and simplest way to claim is to:

•ring the State Pension claim line on 0800 731 7898 (8.00 am to 8.00 pm, Monday to Friday)
•use the textphone service on 0800 731 7339 if you have speech or hearing difficulties
•download the State Pension claim form (BR1), print it out, then complete and send it to your local pension centre.

Posts: 7877
Joined: Wed Aug 06, 2008 3:25 pm

Re: State pension arrears

Postby maths » Mon Nov 07, 2011 7:08 pm

JRG, thanks.

If someone who is age 65 choses to defer claiming their pension until say age 67 the commencement of the pension at age 67 does not give rise to "arrears" as MaggieFlemming claims. The pension commences when age 67 albeit for a larger amount.

"Receipt" for pension (and employment) purposes is the date which is the earlier of entitlement and actual receipt (ITEPA 2003 ss 18 & 31). No entitlement to any pension in my example arises prior to age 67 and thus there would be no relaying back to the previous two tax years of the pension that would otherwise have arisen in those tax years ie tax liability arises from age 67.

Peter D
Posts: 10668
Joined: Wed Aug 06, 2008 3:37 pm

Re: State pension arrears

Postby Peter D » Tue Nov 08, 2011 10:22 am

Deferring a state pension does not create a back pay scenario. If you defer a state pension for 1 year it is increased by 10.4% per year but not compounded. This is sometimes done to avoid tipping into a higher tax bracket, the big dis-advantage is that the person losses those years of pension. Regards Peter

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