Tax in retirement Age-related tax allowance

Planning your retirement

You no longer pay National Insurance when you reach state pension age.

Not all income you receive is taxed. Individuals have an annual personal allowance, which is an amount of income they can keep tax free. For most people it will be £11,000 for 2016-17 (£10,600 for 2015-16). Until 2016, older people were eligible for a larger tax-free allowance but this is no longer the case.  

Age-related allowance for 2015-16 

For income received between April 2015 and April 2016, only those born before 6 April 1938 will receive any extra allowance. Age-related allowance for this group is £10,660. This has remained frozen for several years. For 2016 it has been overtaken by the standard personal allowance.    

Additional age-related allowance is means-tested, and withdrawn once your 2015-16 income exceeds £27,700, at the rate of £1 for every extra £2 income. 

National Insurance in retirement

When you reach state pension age (currently 63 for women and 65 for men, but rising to 65 for both men and women by 2018), you no longer have to pay National Insurance contributions.

Find out more: State pension explained - learn about the state pension in our guide 

If you continue working after state pension age

If you continue working after state pension age, to stop National Insurance being deducted you'll need to prove your age to your employer, either by producing a birth certificate or passport. 

Exceptionally, if you are unable to provide these documents, write to: HM Revenue and Customs, National Insurance Contributions Office, Contributor Caseworker, Longbenton, Newcastle upon Tyne, NE98 1ZZ.

If you are self-employed

If you are self-employed, tick the relevant box on the self-employment pages of the self-assessment tax return to claim exemption from Class 4 National Insurance contributions (NICs). This applies to the end of the tax year in which you reach state pension age, so you may need to carry on paying NICs for some months after your birthday.

Class 2 weekly self-employment contributions should cease automatically, from the Saturday following the date on which you reach state retirement age, but you should check your statements from HMRC to make sure.

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Last updated:

April 2016

Updated by:

Ian Robinson

 

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