HM Revenue and Customs (HMRC) has issued updated guidance for individuals who wish to continue working after reaching State Pension age. The tax authority confirmed that retirees can keep earning while receiving their pension, describing the rules as "pretty straightforward."
Understanding State Pension Age
In the United Kingdom, the State Pension age is currently 66 for those born on or before 5 April 1960. For individuals born after this date, the pension age is gradually increasing, starting at 67. The amount of State Pension you receive depends on your age and the number of years you have paid National Insurance contributions. Additionally, you may have a workplace or private pension, which can also be claimed while you continue working.
HMRC's Advice on Working and Pension
HMRC recently shared advice on social media platform X, stating: "Thinking about working while drawing your pension? Our Q&A is here to help you understand your options, from working alongside a pension to changes in National Insurance. Find out more at Tax Confident and feel confident about tax in retirement." The post was accompanied by a video addressing common questions about combining work with pension income.
The video confirmed that you can work while receiving your State Pension, a private or workplace pension, or both. Many people choose this option, and the tax rules are straightforward.
National Insurance Contributions
Once you reach State Pension age, you stop paying National Insurance, even if you continue working. For employed individuals, HMRC will not deduct National Insurance from any earnings once you reach State Pension age. Your employer will cease taking National Insurance contributions from your wages after verifying your age, which can be done using your passport, birth certificate, or State Pension award letter. You can also request that HMRC write to your employer confirming you have reached State Pension age.
For self-employed individuals, you stop paying all National Insurance contributions from the start of the tax year (6 April) following the point at which you reach State Pension age. HMRC advises: "Remember to put your date of birth on your tax return so we can make sure you stop paying."
Income Tax Considerations
While National Insurance contributions cease, Income Tax does not stop when you reach State Pension age. You will continue to pay Income Tax on your total annual income, which may come from various sources, including wages, self-employment earnings, State Pension, workplace or private pensions, interest from savings, investments, and rental property.
Most individuals benefit from a tax-free Personal Allowance, which is the amount of income you can earn each year before tax is due. The current standard tax-free Personal Allowance is £12,570 per year. If your combined income from employment and pensions falls below this threshold, you will not be liable for any Income Tax.
For further details, visit the GOV.UK website, where HMRC has provided comprehensive information on how working while claiming a pension operates.
