25% tax free ????

slade1961

hi all

slightly puzzled here
have small stakehloder pension 20k
would like 25% tax free out 5k
salary 26k
remaining 15k is problem, as i also would like out, but how do i take out with no or little tax paid

ones opinion would be grateful thank you.

Silvertabby

You can't.

Even if you took out the remaining £15K at the rate of £1K per year, it's taxable income on top of your salary so you'd pay 20% tax.

p00hsticks

The general point of a pension is to provide you with money to live on once you have given up work. If you are trying to draw your pension whilst still earning, as Silvertabby says, it will be effectively added to your salary for tax calculation purposes.

From a taxation point of view it is best to wait until you give up work and then withdraw it in stages to make full use of your tax free allowance each year.

Dazed_and_confused

You cant take it out and pay no tax but given your salary you can immediately take it out and pay the minimum amount of tax possible considering it is pension income and you have a 26k salary.

The tax would be £3,000 so from your original £20k you'd have £17k left to spend. You might pay more tax when the payment is made but ultimately it will be £3,000 after any tax refund is sorted.

That all assumes you don't have other income you haven't mentioned such as savings interest etc. The 26k salary plus 15k pension is getting fairly close to the higher rate threshold, particularly if you live in Scotland.

slade1961

thank you for your replies

i have 3 other pensions plus my state pension with full years contributions . this small stakeholder i would like to cash in ,
as i see it the remaining 15k i would loose 3k in extra income tax?.

Dazed_and_confused

That is glass half empty view.

Glass half full would be you get £17k and make a little contribution to running the country!

Silvertabby

thank you for your replies

i have 3 other pensions plus my state pension with full years contributions . this small stakeholder i would like to cash in ,
as i see it the remaining 15k i would loose 3k in extra income tax?.

Yes, as long as you have no other taxable income apart from your £26K salary, then you'd pay £3K tax from your £20K pension pot. Your pension provider may initially deduct more than 20% tax from your £15K, as they won't have a tax code to work with, but you will be able to re-claim the over payment from HMRC.

bigadaj

slade1961 wrote: »

thank you for your replies

i have 3 other pensions plus my state pension with full years contributions . this small stakeholder i would like to cash in ,
as i see it the remaining 15k i would loose 3k in extra income tax?.

Also don't forget that if you take more than the tfls then you restrict further pension contributions to £10k a year, likely to reduce to £4K or less in the near future.

May not be a concern but you need to be aware of this.

dunstonh

Plus, most stakeholder pensions (all possibly?) do not support drawdown. So, it would almost certainly require a pension transfer.