Pension payout while still employed

NoelDW21

I am reaching my 60th this year and have a Local Gov/Civil service pension due to pay out this year but am on a high salary. At present my salary is just below the 40% threshold but feel that my pension payment may take me over this limit. Would this actually take me over thus tax threshold into the 40% tax bracket or will they be taxed separately?

Advice please as I have also a lump sum payment as well or should I defer till I am 65?

molerat

For tax purposes all incomes are added together so if they are more the higher rate threshold you will pay 40% on that amount over.

atush

You can defer if possible, if not just open a personal pension (or join the pension scheme at your emplyer- always the best if they contribute) and that will lower your income for tax purposes.

Make sure cash savings are in ISAs so as to not increase yoru taxable income.

NoelDW21

Thanks I will have to look in deeper as I think the pension could be taxed at base rate

xylophone

NoelDW21 wrote: »

Thanks I will have to look in deeper as I think the pension could be taxed at base rate

How can this be so if you take the pension while receiving the salary(unless the two together still keep you wholly below the 40% band)?
http://www.hmrc.gov.uk/incometax/taxable-income.htm- work through the links.

jem16

NoelDW21 wrote: »

Thanks I will have to look in deeper as I think the pension could be taxed at base rate

If you provide some figures we will tell you exactly what your position will be. Why do you think the pension would be taxed at base rate?

As xylophone says, if you are just under the 40% tax level with your salary, then your pension payments will definitely see 40% tax being taken on at least some of it.

Basically if your salary minus pension contributions plus your LGPS pension takes you over £42,475 you will pay higher rate tax on the amount over this.