Paying £2880 into pension when retired

bigadaj

SeeMe wrote: »

As someone who is retired and opening a sipp just for cash, £2880 deposit which will be upped buy £720.If i closed it say 12 months later does the money get taxed? how does it work because its a pension and not a savings account.
I am a none tax payer.

25% is tax free, the rest is subject to tax the same as any other income. So if you are a non taxpayer and your total taxable earnings would normally be less than aroun £8000 you dnot pay tax as it is within your personal allowance. If you earn more then whatever is above the personal allowance will be taxed at 20%.

You need to be careful waht supplier you use though, some will charge for closing an account for example.

SeeMe

bigadaj wrote: »

25% is tax free, the rest is subject to tax the same as any other income. So if you are a non taxpayer and your total taxable earnings would normally be less than aroun £8000 you dnot pay tax as it is within your personal allowance. If you earn more then whatever is above the personal allowance will be taxed at 20%.

You need to be careful waht supplier you use though, some will charge for closing an account for example.

I have a pension of just £10,000, £11,500 PA.

So i could take £900 tax free from the 1 year contribution leaving £1200 taxed = my allowance
So £240 taxed which leaves £480 from the tax free top up on my initial £2880.
Is that right?

missile

SeeMe wrote: »

I have a pension of just £10,000, £11,500 PA.

So i could take £900 tax free from the 1 year contribution leaving £1200 taxed = my allowance
So £240 taxed which leaves £480 from the tax free top up on my initial £2880.
Is that right?

If I understand your post correctly(?):
You have £11,500 tax allowance
You have another pension £10,00 p.a. Is this your only taxable income?
You will deposit £2880 into a SIPP, HMRC will top up to £3600

You can withdraw 25%, i.e. £900 tax free
You could drawdown up to the balance of your tax allowance, i.e. £1,500 without tax liability.

This would leave £1,200 in your SIPP which you could roll over to 2018-19 or drawdown and pay tax, i.e. £240.

SeeMe

missile wrote: »

If I understand your post correctly(?):
You have £11,500 tax allowance
You have another pension £10,00 p.a. Is this your only taxable income?
You will deposit £2880 into a SIPP, HMRC will top up to £3600

You can withdraw 25%, i.e. £900 tax free
You could drawdown up to the balance of your tax allowance, i.e. £1,500 without tax liability.

This would leave £1,200 in your SIPP which you could roll over to 2018-19 or drawdown and pay tax, i.e. £240.

I realize it was not well put but you have put it perfect thanks.

I am 62 so its a work pension, and i have some savings and is there not a £5000 saving interest tax free allowance? for low incomes, so i do not have enough savings for me to pay tax?. I will maybe have around £500 interest from my savings

Dazed_and_confused

No, there is no £5000 tax free allowance but there is a tax band which, for some, allows upto £5000 of savings interest to be taxed at 0%. Once that is exhausted (or if you do not qualify to use it in the first place) there is a second 0% tax band for savings income called the Personal Savings Allowance. This allows up to £1000 savings interest to be taxed at 0% (amount depends on your total income is and how much is savings income) but if I've understood your previous posts you wont be able to use the Personal Savings Allowance,

Existing Pension £10,000
SIPP income £2,700 (taxable element)
Savings interest £500
Total income £13,200

Personal Allowance £11500 can be deducted from total income which leaves £1700 which is taxed. Your personal allowance will be used in full on the existing pension and SIPP income which leaves £1200 to be taxed and all of the £500 savings interest is to be taxed

Pension income £1200 x 20% (basic rate tax band) = £240
Savings income £500 x 0% (savings band) = £0
Total tax to pay is £240

If you only took £1500 out of the SIPP then there would be no tax to pay (but would obviously have £960 less income overall in this tax year).

SeeMe

Dazed_and_confused wrote: »

No, there is no £5000 tax free allowance but there is a tax band which, for some, allows upto £5000 of savings interest to be taxed at 0%. Once that is exhausted (or if you do not qualify to use it in the first place) there is a second 0% tax band for savings income called the Personal Savings Allowance. This allows up to £1000 savings interest to be taxed at 0% (amount depends on your total income is and how much is savings income) but if I've understood your previous posts you wont be able to use the Personal Savings Allowance,

Existing Pension £10,000
SIPP income £2,700 (taxable element)
Savings interest £500
Total income £13,200

Personal Allowance £11500 can be deducted from total income which leaves £1700 which is taxed. Your personal allowance will be used in full on the existing pension and SIPP income which leaves £1200 to be taxed and all of the £500 savings interest is to be taxed

Pension income £1200 x 20% (basic rate tax band) = £240
Savings income £500 x 0% (savings band) = £0
Total tax to pay is £240

If you only took £1500 out of the SIPP then there would be no tax to pay (but would obviously have £960 less income overall in this tax year).

Ok thanks.

I have not yet opened a sipp so my income is £10,000 so in that case i can have up to £5000 savings interest tax free?. Of course i could never get near that figure from my savings.

Dazed_and_confused

If your only income other than savings interest was the £10,000 pension then you could actually have £7,500 interest without any tax to pay in the current tax year.

£1,500 spare personal allowance
£5,000 savings tax rate band taxed at 0%
£1,000 personal savings allowance rate band taxed at 0%

xylophone

http://www.taxvol.org.uk/about-tax/entitled-10-band-savings-interest/

SeeMe

Dazed_and_confused wrote: »

If your only income other than savings interest was the £10,000 pension then you could actually have £7,500 interest without any tax to pay in the current tax year.

£1,500 spare personal allowance
£5,000 savings tax rate band taxed at 0%
£1,000 personal savings allowance rate band taxed at 0%

Yes thats how it is at present just £10.000 pension income.

xylophone wrote: »

http://www.taxvol.org.uk/about-tax/entitled-10-band-savings-interest/

Thanks

moneyfoolish

Can somebody please confirm I'm calculating correctly the amount of SIPP Drawdown income my wife can take for 2017/18 without paying any tax?
Her only income is her state pension which is approx £7,000. However, she has untaxed interest of approx £1,300. Her Personal Allowance would normally be £11,500 but she has transferred £1,150 to me reducing it to £10,350. My assuption is that her untaxed interest is well under the £5000 0% band so that she will be able to withdraw £10,350-£7,000=£3,350 as income without paying any tax. Is that correct?