TAX STACKING

Liar, liar – your tax pants are on fire.

The subject of paying tax on state pensions has raised its ugly head again just days before Horrible Healy’s first budget during which the Government will reveal how they intend to deal with pensioner taxation.

Those who have ONLY the state pension to live on but NO OTHER income have nothing to fear from the Tax Man according to Torsten Bell, Pensions Minister who decreed that anyone falling into this bucket should not be burdened with the administrative headache of filling out online tax returns. This pretty much echoes what came out of the last budget (see my post The Policy of Truth Nov 2025).

I can’t wait to hear how the Government are going to deal with ‘liars’ because when it comes to paying tax everyone’s likely to become more economical with the truth, aren’t they? How will the Treasury identify which of us have ONLY a state pension to live on?

I’m thinking that if you only have a state pension to live on ie £13,036 per annum from next April and NO OTHER forms of personal income or savings in the bank then presumably you would be entitled to claim other benefits such as winter fuel allowances or discounts off your council tax which are also not taxed. A double bubble for some.

So, my question again - how will those that claim to be poor pensioners be assessed? There will have to be a mechanism, a form of ‘means-testing’ or some kind of assessment or criteria to determine whether folks have additional income streams or are lying through their teeth when they claim they haven’t a bean to live on other than what the state gives them.

And indeed, I can give you a practical example of how someone with only a state pension to live on can actually earn lots more by using ‘tax stacking’ to maximise their personal income without even having to report it to the Revenue. Read on as you won’t see this shared by Torsten Bell or Money Saving Expert.

Tax Stacking is the practice of layering lots of different tax allowances on top of each other so you can have your cake and eat it without sharing a single crumb with the Tax Man. I’ve put my ‘estimated’ income from each category in bold text. Let the stacking begin:

Annual State Pension from April 2027: £13,036
According to Torsten, if that’s all you have to live on then this will be subject to zero tax.

Renting out a spare bedroom: £3,000
Under the Government’s Rent-a-Room scheme, you can earn £7,500 a year (joint ownership) or £3,750 each before any tax is due. As long as your takings don’t exceed the £3,000-ish mark then every rental penny is yours.

Renting out your driveway: £800
Property Trading Allowance is £1,000 per annum. Incomes from driveways are treated separately to room rental which means that allowing a few punters to pay to park occasionally outside your home can add to your tax-free income.

Side Hustles: £800
Trading Allowance is £1,000 per annum. Incomes from all those extra-curricular activities such as online selling, fast food deliveries, crafting, etc. Yep, those funky bird feeders you fashioned out of scrap timber that you sell on cyber market places are all classed as side hustles. Provided the cumulative total of any income raised from side hustles is below the threshold then not a problem, you don’t need to declare it.

Share Dividends: £300
Dividend Allowance is £500. Tax is only paid if your annual share dividend income exceeds this figure but if you only hold a few shares then anything below this threshold is a free gift.

Savings Interest (not ISA a/cs): £800
Personal Savings Allowance (PSA) for basic-rate taxpayers is £1,000 of savings interest tax-free per year for everything held outside of an ISA tax wrapper. Always keep your cash in an ISA to avoid getting an unexpected tax demand especially now savings interest rates are rising.

Selling Assets: £2,000
Got a few gold trinkets you no longer wear? What about that old oil painting gathering dust in the attic? If you’re thinking of flogging these to boost your pension then remember the Capital Gains Tax annual exempt amount is £3,000. Covers the sale of personal assets that have increased in value not car-booting crap.

By stacking these 6 different tax allowances together to form a tax tower, you can potentially add almost £8,000 to your annual state pension without having to part with a single penny in tax. This is all perfectly legal and above board, no shady business on this blog. Unless the Government decide to do away with any or all of these allowances which is always a possibility at the next budget then feel free to stack away to your heart’s content.

I must add here that these allowances apply to everyone not just those who are living solely on a state pension.  We can all tax stack but bear in mind that if you massively exceed any of these allowances and your main source of income is not just a state pension then you could end up accidentally pushing yourself into a higher tax bracket if your total personal income exceeds £50,000 per annum.

Key takeaway - Know your tax allowances then make sure you always keep your earnings in each category below the threshold for a tax free existence.  If you think I'm talking bollocks then fair enough otherwise ask your local, friendly accountant to explain how you might benefit from tax stacking.

As I’ve always said the secret to a happy, prosperous retirement is getting on top of tax.

LIFE IN THE SLOW LANE

Back in February when early retirement was still a nebulous dream, I had a plan – a list of activities to rush off and do once I was no longer shackled to an office desk. It looked something like this:

Complete wall panelling downstairs
Rip up old corridor carpet for replacement flooring
Take up wild water swimming
Consider joining the local WI group
Dig large hole in garden for a pond
Finish itinerary for a trip to east coast of Australia
Do more volunteering
Buy a sketch book and have an art attack
Climb Snowdonia
Gardening, gardening and more gardening
Sign up for those free local council Heart Smart walks

But in the 6 months since I left work, I’m beginning to realise that the pace of life in retirement is not what it once was. Somehow, I’ve subconsciously shifted out of 5^th gear and moved across into the crawler lane like all those other old tabbies behind the wheel who drive like they have all the time in the world.  Retirement is definitely more milk float than Ferrari.

Procrastination rules and that’s not always a good thing. It now takes me at least 3-4 weeks to get round to doing things which before I would have raced round to cram into an afternoon. Time has developed a gooey fluid quality, flowing like a lazy river through the jungle of my life.

So, I’ve finished the panelling, flooring and have started on the garden but as for the rest of the list? Well, there’s plenty of time to get round to considering it.

The problem with having all day to do stuff is it’s easy to get distracted. Take today for example. I should be touching up the bottom of the architraves in the corridor. I’ve had this task on my ‘To Do’ list for at least 3 months, yet some unseen force prevents me from picking up a paint brush. Instead, I’m blogging, baking, or painting pebbles. Basically, doing random shit except that which is important because that’s what being time rich is all about. Filling your day. With pleasurable, enjoyable fun stuff to while away the hours.

I need painting

In true procrastinator fashion, tasks left undone are transferred across to tomorrow’s ‘To Do’ list. Trouble is, I’m moving over the same things almost daily and never ticking them off. Hopelessly idle. Can’t be helped but more likely can’t be arsed. I’m retired so every day’s a weekend. At some point, I will get off my lazy arse to finish the architraves but for now, I’m off to pick the last of my ripened tomatoes in my nightie before I head off for a shower.

Last of the ripening tomatoes

OMG! CLADDING FINISHED

Not a cloud on the horizon. Today’s forecast is perfect for cladding – not too hot, not too wet and not too windy. Sweet.

The sound of builder’s beavering away outside is music to my ears. I’m hopeful that today could be the day when this cladding project is finally finished but I’m tempering my enthusiasm by buggering off for a spot of tai chi to release all that pent up negative no-cladding energy. I want to see real progress by the time I get back I tell myself as I swan off up the road in tight-fitting leggings in this glorious October sunshine.

I’ve deliberately dawdled home so as not to give the impression that I’ve been all that bothered by the shenanigans of these procrastinating peeps when in fact, I’m desperate to see what they’ve been up to.

Cor! Looks like they’ve pulled out all the stops. The cladding now reaches the apex, covering every inch of wall space. Nice. In addition, a strip of trim is covering all those awful uneven board edges so everything has a tidy finish.

The cladding tide has finally come in

All that’s left to do is fit the last bit of soil pipe, refix the front guttering, clear all the rubbish off site and job’s a good ‘un. 

Soil stack completed

Bedroom window frame neatly trimmed in white

Begone lawn killer!

Was I a bit too hasty in meting out imaginary punishments before any real crime had been committed? Let’s just say I won’t be sending this lot any return invitations for afternoon tea although when all is said and done, they've done a fabulous job sprucing up this tired old wall.  You could almost say it was worth waiting for ...

As for my impatience, I’m laying the blame firmly at the door of my Spanish heritage.

Planters returned to the alleyway

PAYING EXTRA TAX VOLUNTARILY

There’s been a slew of celebrities in the media recently volunteering to pay extra taxes to help the nation. Michael Palin being the last person to publicly express this desire. Clap. Clap. Clap. I applaud these noble sentiments. If you’ve got a few extra thousand quid sloshing about then why not give it to the Tax Man? Fool!

However, since there is no mechanism in place for tax revenue to be paid into Treasury coffers that isn’t actually due then I have a better suggestion to make and that is, give this cash to deserving causes that can put the funds directly into good use.

Do you really trust the Government or The Revenue to actually spend your money wisely? I mean you’ve only got to look at what they spend our taxes on now such as continually giving it to the French to fund their beach inactivity, paying it to wind farms to switch off because the grid lacks the necessary cabling to cope with all that extra power or paying for the unemployed to have nice days out at theme parks. Not much of a philanthropic return on your tax investment in UK PLC is it?

But if you were to donate a sizeable sum of money to a charity of your choice then not only would you probably mitigate some of your own personal tax bill but the funds could be put to immediate use. No doubt there are many local good causes crying out for a chunk of money to fund things that would have a beneficial impact on a community. Michael, just ask your friends, neighbours or your PA to recommend one near you then sponsor it.

Better still, give the money to a local hospice. We might all end up needing their end-of-life care services especially now that the Assisted Dying Bill has been well and truly scuppered. Hospices are known to be under-funded and many may have established means for taking in philanthropic bequests or donations. Giving your surplus cash to these selfless institutions so that folks can be properly looked after in their final days is far more of a noble act than just handing the dosh over to HMRC.

I prefer the Michael Sheen style of philanthropy, buying up the debts of ordinary people then cancelling them entirely thus liberating them from the capitalist enslavement of financial institutions. Definitely the right idea in my book.

So, if there are any other celebs out there with money burning a hole in their pocket who want to give something back to the country then act locally rather than nationally. Do not volunteer to pay extra taxes – no-one in their right mind would EVER want to do that!