Small pension pot

Goldiegirl

My husband has a small personal pension valued at just under £3000, and he's decided to take the money as a lump sum under the 'small pension pot' rules.

They've given him a quotation, showing the 25% tax free amount, and a tax deduction of 20% on the rest of the sum. This is what I was expecting.

They've mentioned that they'll send him a P45.

Therefore, I assume, at the end of the tax year, HMRC will add together his state pension, his monthly annuity payment and his lump sum payment to ascertain his income for the year. Am I right in thinking this means there'll be a further tax liability for the lump sum, as he'll pay income tax on it?

For info, his total income is already over his personal allowance.

I look forward to any answers.

Thanks

Linton

There shouldn't be an extra end of year tax deduction for the non tax free 75% unless it brings him into the higher tax band. The pension company will deduct 20% tax before payment.