Tax on pension pot

steve1500

atush wrote: »

It is INSANE to take a pot of 50K in a lump sum, paying 40% tax on it, to buy a property (the income and gains from which ae taxed).

Sheer and utter madness.

If you want to be stupid and do it, take it over 2 years and pay only 20% tax on it

That assumes second property & buy to let.


How about for family member first time buyer, getting on property ladder.

kidmugsy

steve1500 wrote: »

How about for family member first time buyer, getting on property ladder.

Then be patient and withdraw it over two tax years.

P.S. all the ladders I've ever seen lead down as well as up.

jamesd

steve1500 wrote: »

How about for family member first time buyer, getting on property ladder.

It's still a pretty extravagant waste of money. If you want to give them a deposit how about using a 0% for purchase credit card to get the extra above the basic rate taxed level? Or a personal loan? The interest on those will be less than the extra tax you'd pay taking the money quickly.

It takes about 2.2 years to get the money out all at basic rate income tax using the £17,385 basic rate band you're not using already:

£12,500 tax free lump sum in year 1.
Year 1: £17,385 taxed at basic rate, tax £3,471.60.
Year 2: another £17,385 taxed at basic rate, another £3,471.60 of income tax.
Year 3: the final £2,730 taken and taxed at basic rate, £546 of income tax.

Total income tax due this way is £7,489.20. That saves you £4,033.80 of income tax.

atush

steve1500 wrote: »

That assumes second property & buy to let.


How about for family member first time buyer, getting on property ladder.

I agree, it is still a waste of money. Sure you want to help, but this is your retirement funds, not your 'lets help someone in the family' funds.

those help the family funds are called inheritance. Leave them your property?

kangoora

BizBroacast wrote: »

Hello,

I am a financial journalist looking for case studies on people who HAVE or WILL cashed/cash in their pension pot. The general sentiment on different forum streams seems to be it is a bad idea.

If you have taken your pension pot then please private message me to discuss further. We are looking to understand your reasons why you took and whether you plan to reinvest the money in a different financial product.

Thanks

I've reported your post to the forum admins on the grounds you could be a scammer. I'd suggest you contact them and prove your bona fides before putting any more requests such as above.

If you've already arranged this then I apologise.

stubtoe

jem16 wrote: »

Tax free personal allowance of £10,600/12 = £883.33 not £1060.

So taxable amount is £36,616.67 which would give a total tax amount of £14,116.92.

Think you've both (jem16 and jamesd) missed a step if assuming emergency tax code calculation i.e. remainder isn't all taxed at 40%, some will be taxed at 45%:

25% (£12,500) tax-free
75% (£37,500) taxable

Personal allowance - £883 x 0% = £0
Taxed at 20% - £2,649 x 20% = £529
Taxed at 40% - £9851 x 40% = £3,940
Taxed at 45% - £24,117 x 45% = £10,853

Total tax = £15,322

Net lump sum received = £12,500 + (£37,500 - £15,322) = £34,677

jem16

stubtoe wrote: »

Think you've both (jem16 and jamesd) missed a step if assuming emergency tax code calculation i.e. remainder isn't all taxed at 40%, some will be taxed at 45%:

Quite correct. I hadn't looked closely enough at jamesd's figures and had only corrected the 0% part. However you're right in that there will be some (if not most) due at 45%.