HMRC has issued a warning for anyone who continues working after reaching state pension age. The tax authority took to X, formerly Twitter, to share guidance for state pensioners "thinking about working while drawing their pension."
Guidance for Working Pensioners
HMRC's update aims to help state pensioners who are considering carrying on working despite receiving payments from the Department for Work and Pensions (DWP). The taxman stated: "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."
HMRC added: "No one wants to spend their retirement worrying about tax. Whether you've just retired or you're planning ahead, we're here to help you understand how tax works at this stage of your life."
Understanding Tax in Retirement
When you retire, tax can feel different because your income may come from multiple sources, including a pension, savings interest, or self-employed work. HMRC reassures that "the basics are simple once you know them." A short video and accompanying text explain key topics.
HMRC emphasises: "You don't need to be a tax expert. These pages are here to help you understand the basics, give you confidence and fill any gaps in your knowledge. Each one explains things in plain English. No jargon. No assumptions that you already know how it all works."
National Insurance Changes
Most people know that National Insurance contributions stop once you reach state pension age, which is currently increasing from 66 to 67. However, the exact timing depends on your employment type. HMRC's video explains: "Employed people stop automatically. Self-employed people stop from the next tax year."
If you work for an employer, you may need to provide proof of your age to confirm when National Insurance deductions should stop. Acceptable documents include your passport, birth certificate, or state pension award letter. For self-employed individuals, you must include your date of birth on your tax return so HMRC can ensure you stop paying.
Income Tax Still Applies
Stopping National Insurance does not mean you no longer have to pay income tax. Even those over state pension age must pay income tax on their total yearly income, which can include wages, self-employment income, State Pension, workplace or private pensions, savings interest, investments, and rental property income.
If you remain employed past state pension age, income tax is usually collected through PAYE based on your tax code. This tax code may change if you also claim a workplace or private pension alongside your wages.
