Pensions & Tax

[TZ5]

Assuming I have no other income and I take £20,000 out of a personal pension, which of the following would be the correct amount of tax due?

1. First 25% of pension is tax free so 5k tax free, 11k personal allowance, so tax due on remaining 4k @20% =£800 tax

2. 11k personal allowance, leaves 9k, 25% of this tax free (£2250) which leave £6750 to be taxed at 20% = £1350 tax

Cheers

TZ

[northernladuk]

Maybe you need to have a chat with someone the specializes in taxation? An accountant perhaps?

[TZ5]

Maybe you need to have a chat with someone the specializes in taxation? An accountant perhaps?

Thanks for your detailed response.

I'm sure one of the many talented members on the forum may know the answer

[VillageContractor]

Thanks for your detailed response.

I'm sure one of the many talented members on the forum may know the answer

It's definitely an accountant, I'm sure of it!

[BrilloPad]

Are you over 55?

[WordIsBond]

Probably not too many contributors here are drawing their pensions yet....

[ASB]

On the assumption that you are over 55:-

1) Have you not taken the 25% lump sum previously ?
2) I am assuming this is just a drawdown ?
3) I am assuming it is within the drawdone rules ?

If this is the case then:-

1 - 25% would normally be eligible for the lump sum treatment
2 - the balance is just income

If you have no other income then:-

£5k at 0
£11k (assuming you qualify for 11k personal allowance) at 0
£4k at 20%

If you have other income then the 15k will be taxed at your marginal rate (and may of course increase that by pushing you into a higher tax bracket).

A good way of dealing with it it to open up your sa account and put the number in and do the calc and not file it.

Of course your personal circumstances (or my errors) may make the above a complete pile of since your tax affairs are based entirely on your circumstances.

https://www.gov.uk/tax-on-pension/wh...-whats-taxfree

[FarmerPalmer]

isn't the 25% tax relief for a one off withdraw of 25% of the total fund, not 25% of the amount taken in the first year. So it will depend on the fund value.

as NLUK says, speak to an accountant

[meridian]

isn't the 25% tax relief for a one off withdraw of 25% of the total fund, not 25% of the amount taken in the first year. So it will depend on the fund value.

as NLUK says, speak to an accountant

From the govt link posted above:

"You can usually take 25% of a pension pot tax free. Your pension provider takes tax off the remaining 75% before you get it."

Accountant, though? I would have thought that an IFA would be better.

[BrilloPad]

From the govt link posted above:

"You can usually take 25% of a pension pot tax free. Your pension provider takes tax off the remaining 75% before you get it."

Accountant, though? I would have thought that an IFA would be better.

I thought you could take 25% a year?