Your occupational pensions, personal pensions and retirement annuities are taxed before you get them, under PAYE. HMRC tell your pension payer how much your tax allowance is and how much tax to take off your pension before paying it to you.
What is occupational pension income?
An occupational pension is a pension scheme provided by your employer. An occupational pension is paid on top of your state pension and the contributions you pay to an occupational pension scheme are separate from and on top of the national insurance contributions you pay for the state pension.
What is the difference between a personal pension and an occupational pension?
Occupational pensions are set up by employers to provide retirement income for their workers, while a group personal pension (or stakeholder pension) is a scheme chosen by the employer with an individual contract in place between the pension provider and the member of staff.
Do you have to pay tax on an occupational pension?
Occupational pensions are taxable. Many pensioners do not actually have to pay tax, because their income is too low. Occupational pensions are subject to tax under the PAYE system (the ‘Pay-As-You-Earn’ System) so the process is the same as that applied when you were being paid your salary.
How old do you have to be to pay tax on pension?
When you can take your pension depends on your pension’s rules. It’s usually 55 at the earliest. You might have to pay Income Tax at a higher rate if you take a large amount from your pension.
How is a social welfare pension taxed in Ireland?
If the occupational pension is paid from within Ireland, it is taxed by PAYE in the same way as a wage or salary. This means that you get your tax credits in the normal way. In order to tax your social welfare pension your annual tax credits are reduced by the tax liability on your social welfare pension.
How much tax do I have to pay on my state pension?
State pension income is taxable, but whether or not you have to pay tax will depend on your total annual income. Your annual allowance (in the tax year 2019/20) is £12,500 and the maximum new state pension you can receive is £8,767.
