Early Pension and still wanting to work

sleepymans

Hi
I hope to take early retirement from my civil service job at age 55 when I will be entitled to a lump sum and a (actuarially reduced) pension as I will have 33 yrs service by then.

However I would like to do some other more emotionally rewarding part time work for a few more years, if the tax situation is not excrutiating. I would receive approx £25k lump sum (which I would probably put in a high interest b.s. account) and £7k pension and imagine I would earn about £10k. No other income.

I have standard single person tax code.

Could anyone please give me some idea how much tax would be due on the above figures using this years codes and rates, perhaps.

Thanks hopefully.

Sleepy....

EdInvestor

Next year basic rate will drop to 20% and there will be no more 10% band,

So just deduct the standard personal allowance and it will be 20% tax on the rest and 20% on the savings income as well.

sleepymans

Thanks Ed

I somehow kinda thought there is an extra hidden tax whammy by taking a pension AND having a salary. Glad I was wrong then!!

So if I put the lump sum into ISA/accounts where 20% tax is deducted at source and my personal tax code is allowed against the salary and 20% is deducted from the whole of the pension - I'm covered tax wise?

Would it work like that then, or would my personal allowance be offset against the pension and the whole of the salary taxed at 20%? Would I have any choice about which way round it was applied? (Just thinking the job situation might be quite fluid and changeable as I'll probably be "temping")

Thanks
Sleepy....

EdInvestor

There is no tax deducted when you put money in an ISA.

I'm not sure whether the personal allowance is set against the salary or the pension, but it usually seems to be applied to the largest source of "earned" income with others taxed at basic rate.

MABLE

I am already drawing a pension from a former company I worked for and pay tax at 22%. As I am still working I asked the Inland Revenue to put my allowances against my salary. Inland Revenue regard my job as a secondary income.