Taxation and State Pensions

Your basic State Pension will count as taxable income when you retire, but will be paid to you without tax taken off. If you're still working at this point, then (depending on the amount you earn) you can pay this tax through your employer's PAYE scheme. If not, you'll need to complete a Self Assessment tax return each year.

Tax Implications When Deferring a State Pension

If you defer you State Pension, then, depending on how long you've deferred it for, you can earn a one-off taxable lump sum payment, or a higher weekly State Pension. Both these additional amounts are subject to income tax, and so you'll need to pay tax at the same rate as you're paying on your other income. However, if your total income is low, then you will be exempt from paying any tax.