tax on a lump sum

Sozgirl

Hi there,

I am in almost the same boat as the topic starter, I am also taking my small pension as a trivial lump some but I am not a tax payer, has anyone got an idea of how much tax I'll pay on my remaining 75%.

Thanks
Soz

dunstonh

Sozgirl wrote: »

Hi there,

I am in almost the same boat as the topic starter, I am also taking my small pension as a trivial lump some but I am not a tax payer, has anyone got an idea of how much tax I'll pay on my remaining 75%.

Thanks
Soz

The 75% figure is added to your income in the tax year. You will owe tax on the amount that takes you into the basic rate band. How you are taxed initially though is unlikely to be where you need to be taxed and it is more likely you will need to apply for a rebate (typically at the end of the tax year when you know what your full position for the year is)

Sozgirl

dunstonh wrote: »

The 75% figure is added to your income in the tax year. You will owe tax on the amount that takes you into the basic rate band. How you are taxed initially though is unlikely to be where you need to be taxed and it is more likely you will need to apply for a rebate (typically at the end of the tax year when you know what your full position for the year is)

Thanks very much for your help, I don't pay tax because I am not working now and haven't done for 16 years although I don't claim any benifits, I help out in the family business, but that's voluntary So will I still be able to claim the tax back I pay on the lump sum and do you have any idea what percentege that would be.

Sorry for all the questioms.

Soz

dunstonh

Depending on the size of the pot you probably will pay tax this year.

How much do you get as taxable income?
What value is the pension pot?

Sozgirl

dunstonh wrote: »

Depending on the size of the pot you probably will pay tax this year.

How much do you get as taxable income?
What value is the pension pot?

Sorry I'm a bit thick, not sure what you mean by taxable income, I don't earn any taxable income but not sure if that's what you mean.

Value of the pension pot is around £15000.00

Thanks for your help

Soz

Linton

Sozgirl wrote: »

Sorry I'm a bit thick, not sure what you mean by taxable income, I don't earn any taxable income but not sure if that's what you mean.

Value of the pension pot is around £15000.00

Thanks for your help

Soz

So your total taxable income would be 0.75 X £15000 = £11250. Which gives you £2000/£3000 or so depending on when you take triviality as taxed at 20%.

Sozgirl

Linton wrote: »

So your total taxable income would be 0.75 X £15000 = £11250. Which gives you £2000/£3000 or so depending on when you take triviality as taxed at 20%.

Thank you,

Does this mean I would pay 20% tax on only £2000/£3000, sorry told you I was thick

Soz

Linton

Sozgirl wrote: »

Thank you,

Does this mean I would pay 20% tax on only £2000/£3000, sorry told you I was thick

Soz

If this is your only income for the tax year, yes. The first approx £8K in 2012/2013 and £9k in 2013/2014 is tax free as is of course 25% of the pension pot.

Sozgirl

Linton wrote: »

If this is your only income for the tax year, yes. The first approx £8K in 2012/2013 and £9k in 2013/2014 is tax free as is of course 25% of the pension pot.

Thank you,

Just one more question, do you have any idea if I will pay to much tax at source and I will then have to reclaim the tax from HMRC.

Thanks again for all your help.

Soz

dunstonh

You will have to claim the tax back as it will be taxed as month one earnings when deducted. This means part of it as higher rate tax, part at basic rate.

There is a form to do this which I forget the number at this time but many providers will tell you the form number you need when the paperwork arrives and you can download it from the internet.