Tax in retirement Age-related tax allowances

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 is £10,000 for 2014-15 (£9,440 for 2013-14). Older people may be eligible for a larger tax-free allowance, depending on their age and total income. 

For 2014-15 age-related personal allowance is £10,500 if you were born before 6 April 1948, and £10,660 if you were born before 6 April 1938. This figure is the same as 2013-14 and has now been frozen. As time passes, additional age-related allowance will disappear as it is overtaken by increases in standard personal allowance.  

Age-related allowance income limits

Age-related allowance is means-tested, and withdrawn once your income exceeds £27,000 in 2014-15 (£26,100 in 2013-14), at the rate of £1 for every extra £2 you earn. 

  • In 2014-15, those aged 65-74 with income over £28,000 will get no age-related allowance (receiving simply the standard allowance of £10,000), as will those aged 75 and above once their income exceeds £28,320. 
  • In 2013-14, the cut-off for those born before 6 April 1948 was £28,220 and for those born before 6 April 1938 it was £28,540. Above this, the standard tax-free allowance of £9,440 will apply.    

National Insurance in retirement

As well as being eligible for extra tax-free allowance if you were born before 6 April 1948, when you reach state pension age (previously 60 for women and 65 for men, but currently rising to 65 for both men and women by 2018), you no longer have to pay National Insurance contributions.

Action point: State pension explained - find out more about the state pension in our helpful guide.  

If you continue working after state pension age

If you continue working after state pension age, to stop NI being deducted you'll need to prove your age to your employer, either by producing a birth certificate or passport or giving them a certificate of age exemption (CA4140/CF384). You should be sent a certificate automatically if you say you will carry on working on your state pension claim form. 

Alternatively, 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. 

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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