Tax question and pension payments

Oddjob

I hope someone can help. I want to avoid having to pay tax on my income if possible - I know, don't we all !!

I have an estimated income of £5,000, I am over retirement age but don't want to retire yet. My state pension payments will be £6,552 and private pension £1056 making earnings of approx £12,608.
That will be above the personal allowance which I believe this year is £11,500.
I want to pay into a SIPP to get tax relief but also to build up a bit so I have some extra to draw when I do retire as I don't get full state pension.
I want to try and bring my taxable income down to below the £11,500 personal allowance.
One way to do it would be to de-retire and defer my state pension again, have already had it deferred once, around Christmas time which would bring the taxable earnings down over £1,000, not really wanting to do this if I can help it but will if its my only option, can't bring my work earnings down enough.
Someone mentioned a £1000 savings tax allowance, I don't understand what that is, they said I might get it on having saved in a private pension, does that mean that the first £1000 of my private pension would be ignored or is this only on interest earned, I looked it up on GOV website but still didn't understand.
Would saving into a Sipp change anything?
Also. there was a thread on here somewhere where if you paid into a Sipp and might want to draw it out, ie, not a long term investment, you are better taking out a cash Sipp. I looked on HL website but can't see anything about a cash basis one.
Hope someone can help. Thanks

tempus_fugit

Can't answer all your questions but regarding the cash SIPP, I took out a Vantage SIPP with HL this year and there is an option to leave the money in cash if you want and not invest it.

Dazed_and_confused

There is no allowance which would reduce your taxable income to less than £11,500.

The "allowance" you are thinking of is actually a special tax rate where income is taxed at 0%. But this applies to savings interest and even if you, say another £1,000 in savings interest you wouldn't be able to benefit from it because your total income is too low.

And paying into a sipp wouldn't reduce your taxable income either. You would normally get basic rate tax relief added to the pension fund but a sipp would have no impact on your personal tax position.

If the £5,000 income you refer to at the start of your op is a job then one option would be to see if they have a pension scheme you can contribute from your before tax earnings i.e. salary is £5,000 but say 10% how to company pension so taxable pay is only £4,500.

To be clear that would not put you in better position tax wise than a sipp because you wouldn't get basic tax relief added to the pension but it would be a step towards what you seem to want to achieve.

Is paying a bit of tax all that bad? It does help keep the NHS etc running

xylophone

You are under 75 and your "relevant earnings" for the current tax year will be £5000?

You might consider paying £4000 into a HL SIPP and you would receive tax relief of £1000.

You could choose to take 25% tax free as a PCLS and leave the balance in cash to take out as income in a later tax year when you have only your modest private and state pension income. You would take enough to keep you under your PA.



http://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/member-contributions-tax-relief-and-annual-allowance/

Dazed_and_confused

What xylophone says is no doubt correct but, with reference to your op, doing this will not make any difference to your taxable income which would remain above the personal allowance and you would pay exactly the same amount of tax on your income irrespective of whether you contributed to the sipp or not.

bigadaj

But the OP would have an extra £1000.

I don't particularly see the obsession with paying no tax, but their net position would be better.

Oddjob

tempus_fugit wrote: »

Can't answer all your questions but regarding the cash SIPP, I took out a Vantage SIPP with HL this year and there is an option to leave the money in cash if you want and not invest it.

Thanks, I couldn't find where to do that, I was going to ring them when I am ready to start paying, just got a few things to sort out first.

kidmugsy

Oddjob wrote: »

My state pension payments will be £6,552

Is that new style state pension or old style?

Oddjob

kidmugsy wrote: »

Is that new style state pension or old style?

Old style so I think the interest payments on this are better than the new ones, unless having already deferred it once, it reverts to new style now.