Additional income and benefits - Widows and the tax man

In the second year the position is a bit simpler. If you are under sixty-five, you will be able to have £67.60 a week on top of your pension without paying tax. If you are aged sixty-five or over, the figure is £88.66 assuming that you do not get widow's allowance.

After the second tax year, you will just get a single person's tax allowance. You will then be able to have £8.99 on top of your basic pension if you are under sixty-five and £80 if you are aged sixty-five or more. Table 9 summarizes the position.

Remember that each amount is the average over the year on top of the basic widow's benefits.

Because your widow's benefits take up most of your tax allowances, if you do earn any extra money you will find that your employer will have to tax most of it at the standard rate of 40% in the £.

If you earn more than £81 a week and you are under sixty, you will have to pay National Insurance contributions as well. Once you reach sixty, you do not have to pay National Insurance. You should check to make sure you do not pay any contributions on any payday after your sixtieth birthday.

If you receive a pension from your husband's old employer, it will normally have tax at 89p in the £ taken off it before you get it. You may be able to claim some of this tax back if you have no other income.

The calculations about how much tax you pay as a widow can be complicated. Even the Inland Revenue may make mistakes from time to time. So you should fill in a tax return each year to make sure you have paid the right amount of tax. Ask for one from your tax office.

In the past, little more than patriotism has attracted people to National Savings. But today National Savings is competing hard for your money. For most people there is a worthwhile investment package waiting.

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Additional income and benefits - Tax free Interest

Some National Savings products offer interest or gains which are completely free of tax. These are different from investments in building societies and banks, which pay interest to you as if the basic rate tax had been paid.
On the latter investments, higher rates of tax still have to be paid if you are liable for them and the 'grossed-up' value can affect your age allowance. Neither of those problems arises with National Savings investments.
However, because they are free of tax, the rates of interest paid on these investments are lower than for other National Savings investments. They are all ideal for retired taxpayers, especially those who pay the higher rate of tax or whose income is just above £10,600.
. . . ... see: Additional income and benefits - Tax free Interest