HMRC slightly angry is an understatement

What I meant was that if you have a jug of water and add a mug of water to it, how can you decide which was the original water and which was the added water when you pour yourself a glass to drink.

If someone's fuel bills exceeded the value of the WFA, how can anyone show that that money paid from the account the WFA went into didn't come from the WFA?

If you receive the WFA, it is simply extra money in your account and means that as the WFA is contributing to your income, and is notionally allocated to paying your fuel bills, there will be that amount of money from your other income to spend on other things.

Allira

I took M0nica's point to mean that how would anyone know that the money is or is not spent on fuel for the home.

The money is put into the bank account, the fuel payments come out of the bank account, if that person buys wine, Christmas presents, it is out of that same bank account so how can it be distinguished whether the payments come from income or the WFA?

Well yes, but the quoted post didn’t say anything different, did it? Maybe it’s me😀

It was in this House of Commons Briefing Paper published 5 November 2019, not long before the General Election on 12 December 2019.

researchbriefings.files.parliament.uk/documents/SN06019/SN06019.pdf

Page 21

The Winter Fuel Payment is paid as a cash lump sum and recipients are not obliged to spend it on fuel bills. As noted above, the Energy andClimate Change Committee argued that it would be “more intellectually honest” to rename the benefit and to concede that it was merely a general income supplement. However, research from the Institute for Fiscal Studies, funded by the Nuffield Foundation, suggested that households receiving the winter fuel payment were almost 14 times as likely to spend the money on fuel than would have been the case had their incomes been increased in other ways. An IFS press release on 8 June 2011 stated:

Households receiving the Winter Fuel Payment spend 41% of it on fuel even though there is no obligation to do so. When the same households receive additional income which is not labelled in any way, they spend just 3% of it on fuel. To put it another way, simply increase the income of a pensioner household by £100 and they will increase their spending on fuel by £3. Label that increase a “Winter Fuel Payment” and £41 will go on fuel.Contrary to the predictions of standard economic theory this suggests the name of a benefit has a significant influence how it is spent.

Anyway, my post was more about a way to take the poorest pensioners out of the tax net through reinstating the Age Allowance while not seeming to disadvantage younger people. If pensioners got a tax break and retained the WFP it would be more ammunition for those seeking to stoke intergenerational warfare.

As I said, it was George Osborne who removed AA from 2013 after 38 years. It was also Osborne who accelerated the increase in SP age and then bragged that it was the easiest saving he ever made.

It could be a vote winner for Labour if they took the poorest pensioners out of the tax net and reintroduced an allowance the Tories abolished - but there would need to be a trade off.

I took M0nica's point to mean that how would anyone know that the money is or is not spent on fuel for the home.

The money is put into the bank account, the fuel payments come out of the bank account, if that person buys wine, Christmas presents, it is out of that same bank account so how can it be distinguished whether the payments come from income or the WFA?

I'm not sure who said what you've quoted, M0nica, but it why should they go to the bottom of the class? Unless there was more to the quote, it seems to be saying that there were accusations that the WFP wasn't necessary as pensioners often spent it on other things (threads on here from before the election would confirm this, as people were saying they used it for Christmas wine etc - the moaning started after the LP won the GE).

The quote makes it clear that the poster is aware that there was never a compulsion to spend the allowance on winter fuel, so I can't see any inaccuracies in it. It may be my tiredness to blame though - I'm not sleeping well just now.

As regards tax - I don't think pensions should be exempt, but I do think it unfair that when pensions rise those who have worked and paid into an occupational penalty get less of the rise than those who did not, although I don't really know how to get round that.

The bottom line is that (IMO) there should be an incentive to contribute to society financially, but at present the incentive is to do the opposite, which one way and another seems to be at the root of a lot of the problems we have with benefits, pensions etc. People who have to pay high rents and high childcare costs out of low wages, after being taxed to subsidise those who don't work can't be blamed for resenting the situation - particularly when the non-contributors often get more, when allowances are factored in. I think that this resentment is probably responsible to a great extent for the rise in the popularity of Reform and similar 'solutions', and it scares me. Making special arrangements for people on PC would be another way of feeding that resentment, as those with even tiny occupational pensions would lose out again.

Making it part of energy pricing removes the accusations that pensioners do not spend the WFP on fuel (not that it was ever compulsory to do so)

Whoever said this (I know it was not you Graphite) should be sent to the bottom of the class.

The WFA is a sum of money that went into our bank accounts and adds to the balance there. Once in your bank account it is indistinguishable from any other money in your account. Each month a payment is made to an energy provider. How can one tell whether that payment was from your pension, investment income or the WFA. It is simply taken from the money in your account.

Something needs to change Graphite as the new SP could soon be more than the personal allowance as you say. Great breakdown and good explanation of how things could be done.

Can I mention - if you use the Married Tax allowance where you give 10% of your £12570 Personal Allowance to your Partner/Spouse which then reduces your PA by £1260.

To qualify one partner must be a non-taxpayer earning below £12,570 and the other must pay basic rate tax.

If you do use the MTA and request to remove it from your partners PA then HMRC will straight away take it off your partners PA who will then pay more tax, but they won't put it back onto your PA until the end of the current tax year ie 2027. So not only will your partner/spouse pay more tax but you could too especially with the new SP increase as you may not qualify for the MTA if your total income comes to more than the £12570 PA.

If they can take it off your partners PA and adjust their tax straight away - to pay more - then why can't it be returned to your PA straight away? Seems a bit unfair how they work it.

It is predicted that in a year's time the state pension will exceed the frozen personal allowance taking even those on only the state pension paying tax.

When Reeves spoke to Martin Lewis about this, she said the government was thinking about a “work around” to that those receiving only the *State Pension would not have to pay tax. It could end up simply as HMRC not asking people to complete a Simple Assessment and writing off any tax on however much the pension exceeds the tax personal allowance.

* This effectively means an income of no more than the current full New State Pension.

I don’t think we need workarounds. It would be easier and fairer to reintroduce the Age Allowance. This existed from 1975 to 2013 until it was abolished by George Osborne.

A reminder of how that worked. In 2012, the basic tax personal allowance was £8,105. For younger pensioners, the age-related allowance was £10,500. For people age 75 or over, it was £10,600. For every £2 of income over a £25,400 limit, the age-related element was reduced by £1 until the allowance was back to £8,105.

Inflation is going to be higher this year because of Trump’s war on Iran. Say it hits 8% by September. The triple locked pension could rise to say £260 p w from April 2027 which would mean a SP exceeding the tax personal allowance by around £1,000.

My suggestion would be to reintroduce the Age Allowance starting at £1,000. £1,000 is equivalent to a tax saving of £200 for basic rate taxpayers. Make it £1,500 for pensioners age 80 or over, equivalent to a tax saving of £300.

The tax break would be equivalent to the Winter Fuel Payment which could then be withdrawn for anyone other than Pension Credit recipients, as we had in 2024.

In fact, I would go further than that and abolish it altogether with parallel legislation to make energy providers, including those providing off-grid fuel, discount prices for people of pension age up to the limit of the WFP - which amounts to £4 or £6 a week. If the argument is that people need the WFP because they are having to spend more to keep warm, then it is the energy provider making more money from it so should be the energy provider giving the discount.

This would be like any other retailer where the more the consumer spends, the more they save - up to a given limit. All kinds of retailers offer discounts whether it's cheaper online deliver costs if spending over a certain amount, free P&P, discounted travel etc.

Making it part of energy pricing removes the accusations that pensioners do not spend the WFP on fuel (not that it was ever compulsory to do so).

Reduce the tax burden on pensioners and it could also ease the pressures to keep the triple lock.

A bit of forward thinking about this in 2024 might have averted the PR disaster that is always going to haunt the Labour administration.

Withdrawing universal WFP did have the effect of encouraging more people to claim Pension Credit but the increase uptake was only around 120,000 housholds, nothing like the 880,000 households said to be entitled to PC - which makes me think that number was grossly exaggerated by the DWP in the first place, extrapolated from small sampling numbers.

Now we have the WFP claw back for people with incomes in excess of £35,000 - which seems fair in one respect but penalises single householders.

There are bound to be anomalies and cliff edges but, as NotSpaghetti said, there always are. Tax breaks are per person whereas the WFP is per household so couples would do better out of any change than single householders but, on the other hand, they may also may be heating more rooms and one person may be acting as an unpaid carer for another.

Around 9 million pensioners pay tax. The cost of the tax break would be around the same as the cost of the WFP but the objective of taking the poorest pensioners out of the tax would have been met.

Thoughts?

I agree with graphite. It’s the increase in our state pension that’s not taxed at source so any increase is taken from our other pensions if we have them of course. It’s a financial necessity as my father told me when I first got a job at 15, you have to pay your tax my girl it keeps the country running. Thanks Dad, I am 78 and still paying my tax.

I'm fortunate that all my pensions do increase every year. I have the state pension, an NHS pension and 2 local government pensions from different counties. Like everyone my allowance is frozen so the tiny amount of allowance left over after the state pension is paid is applied to my NHS pension then everything is taxed at 20% All my pensions are small but at least I have them! It is predicted that in a year's time the state pension will exceed the frozen personal allowance taking even those on only the state pension paying tax! The chancellor has promised that those on only the state pension will not be taxed but I'm not sure how she'll do that. It means she will effectively give those on only the state pension a bigger allowance than everyone else and I don't see how that is fair on any of the rest of us!

Op i noticed this month my tiny works pension has been reduced again….and, at the same time they’ve sent me a refund cheque for overpaying the last 2 years!!!!.

I can’t seem to photoshop said cheque online properly-why didn’t they just reimburse me via my online account …nothing makes good sense anymore and I will have to physically go into town to pay in this cheque 🙈

HMRC sent me a letter a few weeks ago, telling me that I will be entitled to my state pension when I reach the age of 67 and l will have my first payment on xx/xx/2031. I did not need to do anything about this letter. I then thought about the amount of money that it must have cost to send those letters to everyone, especially as emails would have been a lot more efficient and the sheer numbers of us born in 1964 alone, more than any other year since the end of the Second World War, means that there will have been around a million letters sent. What a waste of money, money that could have been better spent on not taxing pensions.

Shinamae

I’m 73 and I still work part-time 18 hours in a high dementia care home, I really enjoy my job however my wages go in with my Pension and I end up paying about £150 £160 a month Tax And I do resent Paying tax on my Pension
I know there are those on here who will jump on me from a great height for complaining about this but hey Ho,they are my feelings
A friend told me that when you’re 75 you get a free TV license, I thought well that’s good as I’ve just paid out £183 for this year but then I find out you have to be on Pension credit to get it….
There’s not much I get free doing 18 hours a week work..😬

The free TV Licence was one of those 'bonuses'which were not incorporated as part of the State Pension, like the Winter Fuel Allowance and Christmas bonus. .

That means they can be removed at the whim of governments.

Never mind - you'll get 25p pw extra when you reach 80. 😀
It makes a huge difference.

Ps I'm not sure if you are single or not, but have you checked to see if you can get reductions on Council tax and water rates as a single occupier?

4allweknow

You perhaps only been paid a part month. I know my private pension always seems it hasn't increased as much as it should in the April payment as it only includes a couple of weeks of the increase in April.

I was informed what my future monthly payments would be.

Elusivebutterfly

I agree that we all need to pay a fair amount of taxes to fund the NHS, education and all the other things we take for granted. The problem is that it seems that they are now taking proportionally more tax from those of us on a low income. We used to pay 30% tax on taxable income, now it is 20%. I think we should revert to that and increase the personal allowance.

I think the last time basic rate was 30% was 1979, 47 years ago!

I actually think the rate / personal allowance balance is about right. Even now, when we give employees wage rises, by the time the extra tax & NI have been taken out they end up with a much smaller rise than we have paid. If it was 30%, by the time NI & tax are taken out, they'd get half of what we've paid.

Makes you not want to pay people more when you're paying half of the extra direct to the IR.

You perhaps only been paid a part month. I know my private pension always seems it hasn't increased as much as it should in the April payment as it only includes a couple of weeks of the increase in April.

Graphite Thank you for your wonder accounts head! 😂🤗🌷

No Scottish Gnetters on here? The Scots have about 5 different levels of income tax The lowest paid pay a bit less tax than they would in Englsnd, but a higher tax band kicks in at a relatively low income level £40k I think but haven't checked.

Imo, it doesn't matter how much tax you pay, if you have had a succession of greedy, dishonest governments, services will be poor as both companies are full on trying to get huge investment companies eh Black Rock to take over the country.

Think I am a loony? Look up any sector, go back far renough and you will find BR investing. Not always obviously, you have to look for layers of companies owning companies.

But for example, police services, holiday companies, banks of course, building trades, rental houses.
The political choice is now just an illusion; both parties are doing this. I'm not sure if it has gone too far to be stopped. I hope not but remember 1984?

"BlackRock, which holds £570 billion in UK assets, is exploring further investments in UK infrastructure, including housing, energy, and transport." Why? For the good of the honest people at the bottom of the pile? Think again.

I’m 73 and I still work part-time 18 hours in a high dementia care home, I really enjoy my job however my wages go in with my Pension and I end up paying about £150 £160 a month Tax And I do resent Paying tax on my Pension
I know there are those on here who will jump on me from a great height for complaining about this but hey Ho,they are my feelings
A friend told me that when you’re 75 you get a free TV license, I thought well that’s good as I’ve just paid out £183 for this year but then I find out you have to be on Pension credit to get it….
There’s not much I get free doing 18 hours a week work..😬

You have obviously exceeded your tax free earnings.

Sadly there will always be "cut off" points.
It happened with Working Tax Credit and still happens with Universal Credit.

My total income is £14000 pa, taxed of course. My sister has only the state pension so gets Income Support as well, bringing her total to about the same as mine. With Income Support she gets lots of other benefits which save her money. I resent this.

Butterandjam - my point is that there are pensioners on an income just above needing Pension Credit to top up their income who are paying tax, due to the frozen Personal Allowance.
The Personal Allowance should be raised so that the poorer people do not pay tax. Increased tax rates, possibly graduated as Graphite suggested, would mean the Government gets the same revenue.

Elusivebutterfly

I agree that we all need to pay a fair amount of taxes to fund the NHS, education and all the other things we take for granted. The problem is that it seems that they are now taking proportionally more tax from those of us on a low income. We used to pay 30% tax on taxable income, now it is 20%. I think we should revert to that and increase the personal allowance.

I don't understand your point.

The lowest level of income tax IS 20 %.

Why do you want to pay 30% ?