Retirement - Personal Saving Allowance

frank777

Simple Example
Tom is 64 and has taken early retirement on a modest pension. Has a Personal Tax Free Savings Allowance of £3,000 (very MSE guy) and is due to draw State Pension on 03.04.17. The State Pension will reduce his Tax Free Saving Allowance for 2016/17, but if he defers State Pension for say 5 weeks into new Tax Year 2017/18 - Tax Free £3,000 PSA is paid - Is this called Planning for retirement - very MSE to me?

I suppose it's obvious to everyone or maybe it's considered Tax Evasion - £400 Tax Saving in this example for deferring State Pension for 5 weeks

Don't shout me down, just musing it over, an old fool, not an Offshore tax Exile

badmemory

From experience I would say what you intend to do is wise & will save you contacting HMRC over something they will do nothing about. I made the mistake of taking 2 weeks of mine in the old tax year. Told HMRC exactly how much it would be, got a new tax code through for the old tax year in plenty of time for end of March pay run. Rang & told them it was wrong & got told it wasn't.

A few weeks into the new tax year I got a bill. So ignoring savings, I would defer into the next tax year anyway.

zagfles

frank777 wrote: »

Simple Example
Tom is 64 and has taken early retirement on a modest pension. Has a Personal Tax Free Savings Allowance of £3,000 (very MSE guy) and is due to draw State Pension on 03.04.17. The State Pension will reduce his Tax Free Saving Allowance for 2016/17, but if he defers State Pension for say 5 weeks into new Tax Year 2017/18 - Tax Free £3,000 PSA is paid - Is this called Planning for retirement - very MSE to me?

I suppose it's obvious to everyone or maybe it's considered Tax Evasion - £400 Tax Saving in this example for deferring State Pension for 5 weeks

Don't shout me down, just musing it over, an old fool, not an Offshore tax Exile

I don't think you understand how tax works. What are you talking about with this "personal tax free savings allowance of £3000"? There's a £1000 savings allowance this year, and a £5000 nil rate band for savings, plus the £11k personal allowance.

Taking the state pension on 3/4/17 will mean only a week's worth of the pension max is paid this tax year so how do you think it'll make such a big difference to tax?

frank777

zagfles -I'm keeping the Example Simple: Early retirement pension £13K Personal Savings Allowance £3K

''What's tax-free savings and the starting savings rate? Simply put, for most people these mean that if you earn less than £17,000 a year in income and savings interest combined, you won't have to pay any tax on the interest paid on the savings''

http://www.moneysavingexpert.com/savings/tax-free-savings

State Pension = over £5K + early retirement pension £13K = £18K = £1,000 PSA

It's a basic example - people adjust it to their needs

zagfles

frank777 wrote: »

zagfles -I'm keeping the Example Simple: Early retirement pension £13K Personal Savings Allowance £3K

''What's tax-free savings and the starting savings rate? Simply put, for most people these mean that if you earn less than £17,000 a year in income and savings interest combined, you won't have to pay any tax on the interest paid on the savings''

http://www.moneysavingexpert.com/savings/tax-free-savings

State Pension = over £5K + early retirement pension £13K = £18K = £1,000 PSA

It's a basic example - people adjust it to their needs

I think I was right, you really don't understand how tax works

You still haven't explained this "£3k personal saving allowance". You don't have a £3k personal savings allowance. You're making no sense. Do you mean you have £3k in interest? If you do - say so, it's not an "allowance".

Do you really think if you start taking your state pension in the last week of the 2016/17 tax year then the entire annual state pension gets taxed in the 2016/17 tax year?

Pensions whether state or private don't count towards the £1k personal savings allowance anyway, nor the £5k nil rate band.

Maybe I've misunderstood but you aren't explaining yourself properly.

frank777

Zagfles - £3K is interest earned for Tax Year 2016/17
I try to cut out the confusion and get back to Basics

£3K would be Toms - PSA

I still get the correct answer, HMRC try to confuse you with figures

zagfles

frank777 wrote: »

Zagfles - £3K is interest earned for Tax Year 2016/17
I try to cut out the confusion and get back to Basics

£3K would be Toms - PSA

I still get the correct answer, HMRC try to confuse you with figures

I've said it twice already, but do you really think taking the state pension one week before the end of the 2016/17 tax year will mean the entire annual pension will get taxed in the 2016/17 tax year?

You'll get one week of state pension this tax year. That's all that will get taxed on this tax year. You don't get taxed on money you didn't earn. Did you really think you did? So how do you think you gain £400 by deferring?

£13k private pension plus £100 state pension plus £3k interest would mean no tax on the interest this tax year, as the total is below £17k (£11k PA plus £5k nil rate savings plus £1k PSA).

Or perhaps you need to explain again. Maybe someone else understands what you're talking about.

frank777

I'm sorry ''zagfles'' and thank's - I got it into my head that the State Pension was classed as income for the whole of the Tax year 2016/17, when working out the Personal Savings Allowance. An old and wiser fool now.

“To err is human, to forgive divine.”

any vacancies at HMRC

polymaff

frank777 wrote: »

I got it into my head that the State Pension was classed as income for the whole of the Tax year 2016/17, when working out the Personal Savings Allowance

You'd do well to stop calling the Starting Rate Allowance the Personal Savings Allowance, as well. They're two completely different things