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Taxation: Pensioners

Treasury written question – answered on 8th May 2008.

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Photo of Desmond Swayne Desmond Swayne Parliamentary Private Secretary To the Leader of the Opposition

To ask the Chancellor of the Exchequer what estimate he has made of the amount of tax overpaid by pensioners who opt for four weekly or quarterly pension payments but whose tax codes assume 52 weekly payments in each of the last five years; and if he will make a statement.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

Individuals are liable to income tax on the amount of pension income, including the state pension, they are entitled to receive in a tax year. They can choose to be paid their state pension weekly in advance, or four-weekly or quarterly in arrears. As this does not alter the amount of their income liable to tax, individuals do not overpay tax by virtue of being paid their state pension four-weekly or quarterly in arrears.

Tax is not deducted at source from state pension payments. Where an individual has another source of income which is under pay-as-you-earn (PAYE), HM Revenue and Customs will include the individual's full state pension entitlement in their tax code so that, as far as possible, the right amount of income tax is deducted at source for the year.

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