Thousands of state pensioners face waking up to HMRC bill on doorstep

People can currently earn £12,570 before paying tax, but the State Pension is set to rise thanks to the Triple Lock policy under the new Labour Party government.

Thousands of pensioners have been hit with a HMRC warning. People can currently earn £12,570 before paying tax, but the State Pension is set to rise thanks to the Triple Lock policy under the new Labour Party government.

The new State Pension is due to rise by around £470 to just under £12,000 a year from April next year which means people can soon tip into being required to pay tax even if they receive just a small separate private pension.

Former pensions minister Sir Steve Webb, now of LCP, said: “Thousands of pensioners currently have incomes just below the tax-free threshold, so even small additional increases can bring more of them into the tax net.

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“This does not necessarily mean that they will have to fill in a tax return but it does mean that HMRC will try to collect tax either by deduction from any private pension income or through an end-of-year tax demand.”

Dean Butler, of pensions company Standard Life, told the Telegraph: “The personal allowance, which is the amount of income you can receive before paying tax, has been frozen at £12,570 since 2021-2022 and currently remains fixed for quite a few years to come.

“This means that the full new state pension payment has grown from 70 percent of the allowance in 2019-20 to a likely 95 percent next year, leaving pensioners with only £594.40 of headroom before they begin paying income tax.”

It comes as a separate HMRC warning has emerged - over the self-assessment tax return deadline. Trusha Shah, tax manager at accountancy firm HW Fisher, added: "Last year 96% of people chose to complete their self-assessment tax return online. This means that while an overwhelming majority prefer to do their returns digitally, there are still some individuals who prefer to complete their return via post.

“If you are planning to complete your tax return by post, remember that the October 31 deadline is the date by which HMRC needs to receive all necessary paperwork – not the last day that you can send your return off in the post. If you don’t think you will have enough time, don’t fear – you can still complete your return online, for which the deadline is January 31, 2025.

"To avoid the risk of your return getting lost in the post, and to allow yourself more time to gather all the information that you need to complete your tax return accurately, we’d always recommend completing your return online. If you’ve not done it this way before, don’t worry – the process is very simple and there’s plenty of advice and tutorials available on HMRC’s website that you can follow.”