Does Part Time Work Affect Your Pension?

Author: Garry Crystal

Mrs Juli Murray asks

I am looking for a Saturday assistant. I have been approached by a gentleman who is retired and receiving a pension.

If I employ him will this affect his pension? He will be working 6 hours a week. He is worried about losing his pension if I take him on.

Working When Retired

While six hours per week may not seem likely to bring in a large income, and may not have a bearing on pension amount, it may make a change to actually paying tax. The main issue will be with taxable income, a figure that can change each year. Part-time work during retirement does still count as taxable income. The good news is that the tax-free allowance is usually higher when a person reaches retirement, meaning that you will be able to earn more before paying any tax. A person who is retired and claiming their state pension and then decides to resume work will need to work out whether or not the extra employment income will affect their tax free allowance. This can be done adding up all of your taxable income and then comparing this amount to the amount you are allowed to earn before paying tax.

Pension Income Tax Estimator

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Tax Free Allowance

There are numerous forms of income that are classed as taxable. Taxable income will include all state and occupational pensions, employment earnings, interest made from savings, money from benefits, some income from property, and income from various shares. However there are a number of income sources that are not taxable such as pension credit, premium bonds, certain benefits such as income supports and lump sum pension benefits. Tax free allowances will also include the basic personal allowance that is applicable to everyone and this limit does become higher the older you are. To work out if your part-time employment earnings will make a difference you will need to subtract your tax free allowance from your total taxable income including the new earnings from your part-time job. If there is money left once you have subtracted then you will need to pay some tax, if there is nothing left then you should not be paying any tax and may be entitled to a refund. Also bear in mind that there are certain allowances that can decrease your tax bill such as married couple’s allowance. Anyone who is working after retirement will also not have to pay any National Insurance Contributions. You can find more information on the tax free allowance from government offices such as the Department for Work and Pensions.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Pension Income Tax Estimator lets you estimate the income tax you will pay on your pension, including your personal allowance and the 25 percent tax-free lump sum, so you know what you will actually take home. Try it now →

Showing 20 of 85 questions

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Sassy 23/02/2021 at 8:20 am

I want to employ a lady drawing a private an state pension on a casual basis ,how much can she earn before paying tax she is 68 years old .

Mac 13/10/2020 at 5:11 pm

I am on a NHS pension from my late husband's work. I live in a Council house and pay full rent and Council Tax. I've just been offered work 12 hours a week, will it affect my pension. I also have husband's Superan'.

Trisha 14/08/2020 at 10:36 pm

Im 66 and a widow and recieving state pension. I was recieving nearly full housing benefit. I have just started a job 16hrs a week. I paid £34 a week tax and also now haveto pay full rent and council tax. I am 21 pounds a week better off for working all those hours less my petrol money. Is it really worth trying to make a bit of extra money. Also tired out at the end of the week.

Ron 21/08/2019 at 11:22 pm

England is a shamefull place to live . Tha government does not want to see any one rise out of the gutter . That's why you can't work any extra hours whilst on the old age pension with out it effecting your pension . It's all about not letting anyone rise out of the gutter .

Molly 21/07/2019 at 10:54 am

Im 60 i work 30 hrs a week but finding it hard now as on my feet without a brk i want to go to 16hrs a week could i get any benefits and help with rent im not on any benefits now just my wage

Raj 05/05/2019 at 11:56 am

I want to know i am 55years of age been working all my life i work 25hours a week and live on rent i do not claim any benefite byt struggle every month looking at my money for paying bills i am never late paying bills can you telk me am i elgibile for any benefits please

John 23/03/2019 at 5:54 pm

My wife retired this march and we are getting pension credit, but I am 61 and have a casual job. I am working 10 hours some weeks and sometime less sometimes more. Is it okay if i work more hours some weeks as long as by the end of the year it adds up to 520 hours in the year.

Vic 12/01/2019 at 12:23 pm

If receiving pension tax credit and/or council tax benefit there seems to be an appalling lack of information as to the impact of any possible earnings on entitlement to such benefits.

The lack of clarity (in tandem with beaurocratic difficulties in coping with claims in changing circumstances) creates massive barriers and disincentives to anyone considering earning options, whether through hobby incomes, part time work...often inconsistent self employed work...or through rental income (also unreliable).

These problems appear to mirror the difficulties experienced by those currently at the mercy if universal credit.

Is there any realistic way to cast light on this issue? From a personal perspective I cannot afford to put myself at risk financially...so I am inhibited from trying to earn. (I ran saving down to zero before finally getting help to claim council tax benefit which turned out to be so complex a d ramified that I never want to go through the procedure again). If my feelings are representative of others across the nation it is a very sad reflection of the state of our country and does not sure well for our productivity.

Any clarity on these matters would be if help. Maybe a campaign is necessary to promote action and change?

Jay.Jay 14/12/2018 at 6:47 pm

I am 65 i get state pensions but can i go full time
can i still keep my my state pensions yes or no????

amuri 05/12/2018 at 9:45 am

I am 68 years old and have been offered a job at 12 hrs a week paying £99.this company wants me to go self employed which I feel is more for some one starting a small business.The question is how much income can I earn before tax and how do I let the tax office know that I am working with going self employed

Marty 04/12/2018 at 3:52 pm

I'm a pensioner (68) and took on some part time work for a total of 7 weeks 3 months ago (Sep) Because of this I have just been informed that my pension credit is being stopped. My question is this can I re-apply and if so how long do I have to wait. I have only my state pension to live on £112.00 a week....

arty 18/10/2018 at 6:34 pm

I am on Pension Credit. My hobby is art and occasionally I sell a painting. I do not make a profit as I buy materials. Do I have to register for self-assment?

Ninno 19/09/2018 at 1:35 pm

My husband is 67 and receives his pension and guaranteed pension credit and I am 62 and named on it but I want to know if I can go to work and how will it affect his pension,housing benefit council tax etc

Duff1 15/09/2018 at 1:03 pm

I am 67 years old and on a state pension and small NHS pension, which enables me to claim savings credit.

I own an old village house (renovation) which is up for sale(long story!) Housing benefit have said I have 26 weeks to sell then I will lose both my housing and saving credit benefits.
I have just been told, the house sale has fallen through, I am in a total panic as I will not be able to afford to pay my rent, council tax, bills and food, out of my pension alone. If that happens I could become homeless. Any advice very much appreciated.
Help!!!!!!

Karen 23/08/2018 at 6:43 pm

I receive the married couple allowance as my husband is a low earner. Will I lose this when he retires next year and claims old age pension? Thanks advance.

Harry 20/08/2018 at 9:52 am

I am retired in receipt of private pension, I do some casual work gardening when asked by a customer. Do I need to declare what I earn ie 20 to 40 pound a week at the most.

Herflick 14/07/2018 at 7:54 pm

My husband receives pensions credit. How many hours can I work with out claiming it. I'm not pension age yet.?

FinancingRetirement Editor 19/06/2018 at 11:39 am

You can choose to keep on working, whether paid or on a voluntary basis, while claiming your State Pension. Any money you earn will not affect your State Pension, but it may affect your entitlement to other benefits such as Pension Credit, Housing Benefit and Council Tax Reduction (help with your rates in Northern Ireland), It would be worth speaking to someone at Citizens Advice Bureau or the DWP to see what your best options are.

paul 18/06/2018 at 3:36 pm

I am 65 on 3rd july.2018. date given for state pension 06/03/2017. age then was 63years 8months and 3 days.I want to continue working.part time,I do 10 hours per week. I hav'nt intentionally defered my pension claim,so am a bit worried that because i get housing benefit i should inform pensions people.If they reduce my benefit I wil have to pay the difference,And i cannot afford to do this.what shall i do?

Maz 15/04/2018 at 2:59 pm

I am a pensioner claiming housing benefit, how much am I allowed to earn

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