The Pearson Pension Plan

National Insurance

You do not pay National Insurance (NI) after you reach State Pension Age (SPA), even if you are still working, unless you are self-employed and pay Class 4 contributions. You stop paying Class 4 contributions at the end of the tax year in which you reach SPA.

Income tax

We all have a personal tax-free allowance, which is the amount of income you can receive before paying tax. This tax-free amount starts to reduce if your income exceeds £100,000.

The standard Personal Allowance is £12,570 for the tax year 2024/25. This means that you can earn or receive up to £12,570 in the current tax year and not pay any tax. If you earn or receive less than this amount, you are a non-taxpayer.

Your Plan pension is taxed by the pension payroll through Pay as You Earn (PAYE), in the same way your salary was when you were working.

Not all your income may be taxable. Below are some exemptions:

• Married Couple’s Allowance
• Pension Credit
• Universal Credit
• Attendance Allowance
• Disability Living Allowance
• Personal Independent Payment
• Winter Fuel Payment
• Individual Savings Accounts (ISAs)

You can use the HMRC tax calculator to check you are paying the right amount of income tax, the link is in the list at the bottom of this page.

Tax on your savings

The Personal Savings Allowance is the amount of interest you can receive on your cash savings, tax-free. It is currently £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Banks and building societies no longer deduct tax from the interest on your savings as they did in the past. If you go over the Personal Savings Allowance, you will have to pay tax directly to HMRC.

Frequently asked questions

• Is my State pension taxed differently?

  State Pension income is taxable but is usually paid without any tax being deducted. As it is taxable, it uses up some of your tax-free personal allowance, and so the amount of income tax you pay, depends on your total annual income from all sources. If you must pay tax, this is usually deducted from any personal or workplace pension you may have.

• What is Inheritance Tax?

  Inheritance Tax is a tax on the property, money, and possessions (estate) of someone who has died.

  The standard Inheritance Tax rate is 40% and is only applied to the part of a person’s estate that is above the threshold of £325,000. If your estate is worth less than the threshold, then no Inheritance Tax is payable.

  If you leave your whole estate to your husband, wife, or civil partner, then no Inheritance Tax will be payable. This also applies if you leave anything above the £325,000 threshold to a charity or a community amateur sports club.

  If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold can increase to £500,000.

  Any Inheritance Tax payable when you die is paid to HMRC out of the funds from your estate. The rules and exemptions around inheritance tax are complicated and you should seek professional advice.

• Where can I get further help with tax queries?

  TaxAid – They offer free, confidential advice on tax to those on low incomes.

  Tax Help for Older People – Is a charity service that provides free, independent advice and expert help for older people on lower incomes who cannot afford to pay for professional tax advice.

  The Low Incomes Tax Reform Group – Their website contains guides, resources and help for people who may not be able to afford professional advice.