Martin Lewis has issued a warning to state pensioners about the tax implications of taking on part-time work. During the Christmas special of The Martin Lewis Money Show Live on ITV1 and ITVX, the Money Saving Expert founder addressed a viewer's question about whether she would pay tax on her state pension if she got a part-time job.
Lewis explained that the state pension is taxable income, but most people can earn up to £12,570 a year without paying tax. The current full new state pension is £11,900, so those receiving only the state pension do not pay tax. However, from April, the state pension will rise to £12,500, still below the tax threshold. But with thresholds frozen, it is likely that by the following year, those on the full new state pension will start paying tax even without other income.
For pensioners considering work, Lewis stressed that any earnings on top of the state pension would likely push total income over the Personal Allowance, triggering tax. However, he emphasised that tax is only paid on the amount above £12,570. For example, on total income of £15,000, tax would be 20% on £2,500, equating to £500, leaving a net gain of £2,000 from the extra work.
Lewis concluded: “The more you earn, the more you take home. Yes tax comes off, but it's never worth not working because of tax. You'll always earn more the more you get paid.”
