I’ve heard on the radio that my small pension is going to be taxed, but I’ve never paid tax on it before. Will I have to pay the tax due for all the years I’ve received the pension in one go?
Don’t panic. The change in tax treatment only applies to pensions of £1,000 or less per year, which were not previously taxed. If you have one of these small pensions you will not have to pay tax immediately, any tax due will be collected month by month after 6 April 2009 under the PAYE system. No tax will be demanded for small pension payments made before April 2008. It is quite possible that your tax free personal allowance will cover all of your state pension and small private pension you currently receive, so no tax will be due on any of your pensions. Ask us to check this for you.