£2880>£3600

itsanne

jamesd wrote: »

Thank you for making this so clear. Since the current personal allowance is £11,000 and only £2,700 of the pension money is taxable this means that you would be subject to income tax on £1,700 of the money. So for your £2,880 paid in you would get out £900 + £1,000 + £1,700 * 0.80 = £3,260, a gain after tax of £380.

Presumably OH would also lose the £200 he gets as I've transferred my personal allowance to him?

jamesd

Your OH would keep the £1,100 of extra personal allowance and yours is reduced by that much.

This means that all of your taxable 75% would be taxed at 20% so your gain would be the £180 a year.

esmy

Please can anyone clarify - would I be able to reinvest my pension lump sum (received very recently ie in the current tax year)in this manner or does this break the rules? Would be thinking of £2880 pa and closing after the 12 month period is up.

Will probably pay a very small amount of tax this year, non tax payer thereafter

uk1

esmy wrote: »

Please can anyone clarify - would I be able to reinvest my pension lump sum (received very recently ie in the current tax year)in this manner or does this break the rules? Would be thinking of £2880 pa and closing after the 12 month period is up.

Will probably pay a very small amount of tax this year, non tax payer thereafter

It doesn't matter where you got your £2880 from.


Jeff

zagfles

esmy wrote: »

Please can anyone clarify - would I be able to reinvest my pension lump sum (received very recently ie in the current tax year)in this manner or does this break the rules? Would be thinking of £2880 pa and closing after the 12 month period is up.

Will probably pay a very small amount of tax this year, non tax payer thereafter

It looks like this could be caught by the recycling rules. See:

http://adviser.royallondon.com/pensions/technical-central/information-guidance/contributions-and-tax-relief/recycling-of-tax-free-cash/

http://www.hl.co.uk/__data/assets/pdf_file/0005/45428/Recycling_Factsheet.pdf

jamesd

esmy wrote: »

Please can anyone clarify - would I be able to reinvest my pension lump sum (received very recently ie in the current tax year)in this manner or does this break the rules? Would be thinking of £2880 pa and closing after the 12 month period is up.

It's almost certainly fine, in part because HMRC has never invoked those rules against an individual because they are intended to block organised schemes.

If any of these are true it is definitely fine:

1. The total amount of all tax free lump sums taken in a twelve month rolling period (not tax year, actual months) is no higher than £7,500.
2. You didn't plan to recycle when you took the tax free lump sum. HMRC has to prove that you did, not you prove that you didn't. This would catch out people using organised schemes.
3. The timing of the lump sum(s) coincided with routine things like retiring or reaching the normal retirement age of a defined benefit pension.

If none of those apply, add up the total amount of pension contributions you make in the year of taking each lump sum, the two tax years before that and the two tax years after that. Divide by five and compare to your typical amount of pension contributions.

A. If the average is not more than 30% higher than before it's fine.
B. Subtract the average of those five years from the previous average and multiply by five. If this is less than 30% of the value of the lump sums it's fine.

Since people have worried about this before I added a specific mention of the recycling limits to my description of this.

esmy

jamesd wrote: »

It's almost certainly fine, in part because HMRC has never invoked those rules against an individual because they are intended to block organised schemes.

If any of these are true it is definitely fine:

1. The total amount of all tax free lump sums taken in a twelve month rolling period (not tax year, actual months) is no higher than £7,500.

Thanks for you help with this. This was my concern/confusion. My occupational pension (LGPS) lump sum paid very recently exceeds the £7,500 limit so presumably there would be no advantage to me within the 12 month period of this being paid??

uk1

esmy wrote: »

Thanks for you help with this. This was my concern/confusion. My occupational pension (LGPS) lump sum paid very recently exceeds the £7,500 limit so presumably there would be no advantage to me within the 12 month period of this being paid??

esmy,


You need to reread Jame's post.

There would be a very minor technical breach but HMRC has never invoked the rule. It is to protect revenue against organised schemes. If they ever did it would only likely be a much much bigger fish than you.

I'm sorry that you have been unnecessarily concerned about it. Quite frankly in my opinion you can ignore the risk as though you hadn't been warned of it and do it, but of course it is entirely up to you.



Jeff

uk1

I have just opened my wife's Virgin pension account. I fully understand I am being lazy and asking when I could spend hours more searching ...

Is it possible to backdate payments to earlier years ie make x backyears x £2880 and claim that for being payments for previous years?

Thanks muchly.

Jeff

bigadaj

uk1 wrote: »

I have just opened my wife's Virgin pension account. I fully understand I am being lazy and asking when I could spend hours more searching ...

Is it possible to backdate payments to earlier years ie make x backyears x £2880 and claim that for being payments for previous years?

Thanks muchly.

Jeff

Nope, you used to be able to do that but it's a good few years ago now.