Help needed - VER

superloopy_2

jamesd wrote: »

... you'll be taxed on some of it and have until the end of this tax year to pay into a pension, then can reclaim the higher rate tax at the start of the new tax year.

Jamesd ... just one last quick question if I may ...

How does this work? Assuming that i take full lump sum (£75k) , and that first £30k is tax free and that I personally deposit the remainder (£45k) into a personal pension for me, what will the tax liability be ? Can I get any of this back?

Are deposits to personal pensions tax free and up to what level?

So far this tax year i have already 'earned' £31k which amounts to £25k liability at standard rate after allowances. Guess i've only got £13k of leeway left before i hit higher rate so does that mean that of my £45k that £32k will be at 40%?

Gulp!

As an aside, i find this whole finance business to be totally addictive. Who knows if i ever do return to work it may be in this field

superloopy_2

Another day has passed and i've got an extension until tomorrow lunch time to 'make your mind up' but i'm still not happy that if i take the offer my lump sum will evaporate into the hands of the taxman. If i deposit the lump sum into a personal pension pot will i still be taxed at 40% on it or not? I realise that an IA would be able to sort this out but to be honest there just hasn't been the time allowed by the company who seem keen to move people on or withdraw them form the exercise. I'm reluctant to withdraw but would be happier knowing that i still have options to minimse any tax liability should i choose to proceed and take the lump sum in full ...

jamesd

Yes, that would be 32k taxed at 40%.

If they don't pay the part above 30k (or the part above higher rate if you want maximum basic rate income) directly into a pension for you then you will be taxed before you receive it. You could then pay that after tax and NI amount over 30k into a personal pension or SIPP and a month or so later basic rate tax relief would be received from HMRC by the pension and added to your investments. You would claim the higher rate tax relief via a letter to your local tax office once the tax year ends. In this case both you and they lose the NI, since there's no rebate for that once it's been paid.

You can only save the NI part if they pay it directly into a pension.

You get tax relief on personal pension contributions up to a couple of hundred thousand Pounds a year.