Cashing in a pension

minnie181

I am cashing in my pension in july under the trivial pension scheme. I have been told that I can have 25% tax free but the remainder will be taxed at 22%. It is not a lot just under £10000 is there any way I could move the mony so the taxman doesn't get his greasy mitts on it? after all I have worked since I was 15 and paid my taxes all these years. Advice please.

McKneff

If the whole of your pension pots are added together and they all come to under the magic number £18K then yu can claim the whole lot back as cash,

If they all add up to over this amount then yo can take 25% as a lump sum and the rest as an annuity, either now or later.
It depend on other income as to whether you pay tax on it,

atush

Read the Sticky on the main page abt cashing in your pension.

All pensions are taxed on the way out at basic rate tax over eht 25% tax free lump sum. If you don't take it all, but take it yearly in drawdown/annuity you might be under your personal allowances and therefore not taxed (at least until state pension starts).

The taxman has the right to tax any income over your personal allowance so I suggest you put as much in ISAs as you can, or emigrate to a place where no tax is paid. Your 'free' NHS care has to be paid for, along with other things does it not?

Linton

minnie181 wrote: »

I am cashing in my pension in july under the trivial pension scheme. I have been told that I can have 25% tax free but the remainder will be taxed at 22%. It is not a lot just under £10000 is there any way I could move the mony so the taxman doesn't get his greasy mitts on it? after all I have worked since I was 15 and paid my taxes all these years. Advice please.

But you didnt pay any tax on the money in the pension. If you arent using it as a pension isnt it reasonable that you pay the tax you would otherwise have paid earlier?

minnie181

Thank you guys for your replies and I do get the point about "free NHS" having to be paid for. I started work at 15, got married at 17 and always paid full NI even though I was entitled then to pay a married womans rate. I only stopped working for brief periods to have my children, returning when they were still babies. I believe I have more than covered my NHS contributions as I can count on one hand how many times I have needed to use it.

atush

Well, what kind of income do you have now, are you still working?

If not, use DD and not pay any tax on the 75%? You don't HAVE to take it all at once.

noh

The 75% remainder is treated as taxable income in the year it is received.
Will you have any other income in the tax year that you cash in the pension?
If so how much?
If you have other income can you defer that income till the next year?

dunstonh

I am cashing in my pension in july under the trivial pension scheme. I have been told that I can have 25% tax free but the remainder will be taxed at 22%. It is not a lot just under £10000 is there any way I could move the mony so the taxman doesn't get his greasy mitts on it? after all I have worked since I was 15 and paid my taxes all these years. Advice please.

Actually, a portion of that will suffer higher rate tax and you will have to claim the rest back.

You avoid the tax when make the contribution. By effectively voiding the pension as you failed to make sufficient provision, the tax you avoided when the contribution was made is now collected.

after all I have worked since I was 15 and paid my taxes all these years.

Yet only made £10k of pension provision?

atush

Yet only made £10k of pension provision?

I must say I was thinking that ;-)

brianrhill

minnie181 wrote: »

I am cashing in my pension in july under the trivial pension scheme. I have been told that I can have 25% tax free but the remainder will be taxed at 22%. It is not a lot just under £10000 is there any way I could move the mony so the taxman doesn't get his greasy mitts on it? after all I have worked since I was 15 and paid my taxes all these years. Advice please.

Anyone spot the deliberate mistake?

jamesd

It's really unlikely that you will pay tax at 22%. Basic rate tax is 20%.

To be able to use the triviality rules it's a requirement that the total capital value of all of your pensions be low enough. Do you really have no other pensions, including no work final salary or other types?