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<p>Income tax is calculated on arrears of state pension for the tax year in which
the pensioner was entitled to receive it, and not in the year in which a lump sum
is paid.</p><p> </p><p>Where arrears of state pension are paid, income tax will only
be due on any income that exceeds the personal allowance for the respective tax year.</p><p>
</p><p>In addition, HM Revenue and Customs <del class="ministerial">can</del> <ins
class="ministerial">will </ins>only collect income tax for the current tax year and
the four preceding tax years<ins class="ministerial"> for arrears payments made due
to DWP error</ins>. Any arrears of state pension relating to earlier years will not
be subject to income tax.</p><p> </p>
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