Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what the tax liability is for women who receive back payments of underpaid state pension in a single financial year; and if he will make a statement.
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.
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.
In addition, HM Revenue and Customs will only collect income tax for the current tax year and the four preceding tax years for arrears payments made due to DWP error. Any arrears of state pension relating to earlier years will not be subject to income tax.