Tax on a lump sum?

elvis86

Not sure if this is the correct board for this, so apologies in advance if it should be elsewhere.

I'm about to receive a small taxable lump sum of £2262.55. I work full time, my tax code is 747L. How much will I actually recieve? I can probably calculate the tax myself, but will NI be payable?

Thanks!

sunshinetours

What is it for? If its employment related then yes probably NI'able and you will pay tax at whatever your highest tax rate is

Need more info really

elvis86

sunshinetours wrote: »

What is it for? If its employment related then yes probably NI'able and you will pay tax at whatever your highest tax rate is

Need more info really

Sorry, it's a small pension from a previous job. The company I worked for has been taken over, and if the value of your pension pot is less than £18,000 they are giving you the option to cash it in.

Tax_guru

As it’s income from a pension then no, there will be no NIC on it.

sunshinetours

Thank you - in that case a quarter should be tax free and the remaining three quarters will be taxed at your normal tax rate

You may get better value transferring it to a new scheme and check there are no special protected right attached to the scheme although wioth only £2k or so in it they would have to be pretty special!

elvis86

sunshinetours wrote: »

Thank you - in that case a quarter should be tax free and the remaining three quarters will be taxed at your normal tax rate

You may get better value transferring it to a new scheme and check there are no special protected right attached to the scheme although wioth only £2k or so in it they would have to be pretty special!

Thank you for replying!

So I don't get taxed on a quarter of it? That's good. I'm definitely going to take it, I could do with the money and it's not really an amount worth keeping in a pension IMO.

I'm taxed at 20%, so I should come out with 1923.17? I was expecting it to be more like £1500, so that would be brilliant!:D

John_Pierpoint

How old are you?

http://www.litrg.org.uk/pensioners/life-events/coming-up-retirement/triv-comm

http://www.hmrc.gov.uk/incometax/overpaid-thro-pension.htm#5

elvis86

John_Pierpoint wrote: »

How old are you?

http://www.litrg.org.uk/pensioners/life-events/coming-up-retirement/triv-comm

http://www.hmrc.gov.uk/incometax/overpaid-thro-pension.htm#5

I'm 24, will that have some kind of bearing on it?

sunshinetours

Don't think so - presumably the former scheme is being closed down and you are not claiming it under triviality rules mentioned above (they are for perople who reach retirement age with a very small provision) . I would assume you had only paid into it for a short period as well.
Wife had one from a former employer previously and did exactly the same

elvis86

sunshinetours wrote: »

Don't think so - presumably the former scheme is being closed down and you are not claiming it under triviality rules mentioned above (they are for perople who reach retirement age with a very small provision) . I would assume you had only paid into it for a short period as well.
Wife had one from a former employer previously and did exactly the same

Thanks. Yes, I only paid in for 2 or 3 years (hence the small balance and hence the new owners of my old company wanting to pay me out rather than transfer to their scheme).

Did your wife get taxed as you described before? A quarter tax free and her regular rate of income tax on the rest?

John_Pierpoint

I don't know the details of your particular scheme, but coming out of a pension scheme early, without transferring or linking to another scheme, usually works like this (taken from the NHS pension scheme):

Reinstatement into the State Second Pension
Members of the NHS Scheme are contracted out of the State Second Pension (formerly the State Earnings Related Pension Scheme (SERPS)). Members pay a reduced rate of National Insurance. When NHS Pensions pay a refund, we must also pay what is known as a Contributions Equivalent Premium (CEP) to the National Insurance Contributions Office at HM Revenue and Customs (HMRC), to reinstate your benefits in the State Second Pension. The first deduction from the refund is your share of this CEP payment. If you want further information about this, please write to HMRC, National Insurance Contributions Office, Benton Park View, Newcastle-upon-Tyne, NE98 1YX, quoting your National Insurance number.
Income tax
Income tax at 20% must be taken from the amount remaining after the deduction of the CEP, 40% income tax is deducted from any amount refunded over £10,800. Income tax is deducted regardless of any tax relief due at the time of the refund or allowable when contributions were originally paid. You cannot reclaim this tax from the Inland Revenue.