6 things you should know about retirement, pensions and Self Assessment

There are about 12m people in the UK aged 65 years or more, which is roughly a fifth of the population. As we reach a certain age, naturally we begin to think about retiring. You might be at the very stage. Being aware of certain important facts can really help you. So, here are 6 things you should know about retirement, pensions and Self Assessment.

1. The State Pension age is going up…

From 1948 until 2010, the State Pension age for women was 60 and 65 for men. By 2018, the State Pension age for both men and women had been changed to 65, and it began rising again until it was 66 for both come October 2020. The increases are obviously because average life expectancy in the UK has risen considerably in the past 75 years. Under current law, the State Pension age will increase again to 67 between 2026 and 2028, then to 68 between 2044 and 2046.

Need to know! Currently, to access your State Pension you must be at least 66 years old and have made at least 10 years’ worth of National Insurance contributions. To get the full amount you must have paid National Insurance for 35 years.

2. You can access your workplace or personal pension earlier…

Since 2012, UK workers have been automatically enrolled into workplace pension schemes. These become accessible when you reach 55 (57 from April 2028), which is also true for personal pensions.

Did you know? Most people in the UK retire when they’re about 65, but many are choosing to delay their retirement. According to insurers Legal & General, the number of people working into their 70s has risen by more than 60% in the past decade.

3. You cannot be forced to retire…

The Default Retirement Age (then 65 for men and 60 for women) was scrapped in April 2011. According to leading charity Age UK: “There is no legal retirement age, and employers can no longer force their employees to retire at a particular age. It’s up to you when you decide to stop working.”

Need to know! As Age UK also points out, there are exceptions where an employer with good reason can force you to retire by law, because your job requires you to have a certain level of mental or physical ability or has an age limit determined by other legislation.

4. You can still get your State Pension if you continue working…

As you approach your 66th birthday, you’ll be asked if you want to claim or delay your State Pension payments. You can still claim your State Pension if you carry on working, but it might be wise to delay it, because it can be a more tax-efficient option for you.

Need to know! If you work beyond State Pension age, you won’t need to pay National Insurance contributions. You may need to show your employer proof of your age so they stop making NI deductions from your pay. Income Tax may still be payable, depending on your total income.

5. You may have to pay tax on your pension…

Tax is payable if your total taxable income is more than your Personal Allowance (£12,570 in the 2024/25 UK tax year). The standard Personal Allowance is the amount of income that you can receive without paying any tax. Your total taxable income can include: your State Pension (or the new State Pension); Additional State Pension; a private pension (workplace or personal); earnings from employment or self-employment; taxable benefits you receive; income from investments, rental property or savings; capital gains (made from selling some assets).

Need to know! Although some can be taken tax-free (up to 25% of the amount built up in any pension up to £268,275), you may have to pay Income Tax at a higher rate if you take a large amount from a private pension. You may also owe extra tax at the end of the tax year. The tax-free lump sum does not affect your Personal Allowance.

6. Tax on pensions is paid in different ways…

• If you get the State Pension and a private pension, your pension provider will take off any tax you owe before they pay you, as well as any tax you owe on your State Pension. If you get payments from more than one provider, HMRC will ask one to take the tax off your State Pension.
• If you just get the State Pension and your income is below your Personal Allowance (£12,570 in the 2024/25 UK tax year), you won’t need to pay any tax. If you go over your Personal Allowance, HMRC will send you a Simple Assessment tax bill, telling you how much you owe and how to pay it.
• If you continue to work for someone else, your employer will deduct any tax due from your earnings and your State Pension (if you get it) via Pay As You Earn (PAYE – the system HMRC uses to collect Income Tax and National Insurance contributions from employed workers).
• If you work for yourself (ie you’re self-employed), you’ll need to fill in a Self Assessment tax return at the end of the tax year. Through this, you report your total taxable income, including the State Pension and any payments you have received from private pensions.
• If you earn other taxable income (eg from renting our property), you’ll need to fill in and file a Self Assessment tax return. Self Assessment is the system HMRC uses to collect Income Tax. If you owe any tax on investment income, HMRC will send you a calculation telling you how much you owe and how to pay it.

Need to know! If you live overseas but are UK resident for tax purposes, tax may be payable on your pension, if it goes over your Personal Allowance. If you’re not UK resident for tax purposes, UK tax is not usually payable on your pensions, but it might be in the country where you live.

• GoSimpleTax makes reporting taxable income via Self Assessment easier, quicker and cheaper than paying an accountant to do it. Many other retired people already use it to report their taxable income. GoSimpleTax can ensure that all of the necessary parts of your tax return are completed, without any basic mistakes, giving you peace of mind. Have a free, no obligation trial to see how GoSimpleTax makes completing and filing tax returns so much simpler.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.