penion and tax relief

LouisT_45

If I cash in a £30,000 plan in full how much will be taxed at 25%?

I earn £30,0000 aporox.

I realise that I can get a refund after an Emergency Tax Code

Dazed_and_confused

None of it will be taxed at 25%, either when the payment is made or when HMRC calculate your actual tax position after the year end.

Is £30,000 the full pot or the taxable element?

LouisT_45

Taxable element- I am due to take my 25% tax free

So If can it in how much will they take?

what is my best option? and why is it not taxed at 25%?

Dazed_and_confused

There is no 25% tax rate on pension income in the UK.

Scotland has 19, 20, 21, 41 and 46%

Rest of the UK has 20, 40 and 45%

So you have a pension fund of £40,000 of which £30,000 is taxable.

The pension company should deduct £11854.95 if you take the whole lot in one go.

The amount of any tax subsequently repayable will depend on your total taxable income for the year but you are highly likely to be paying some at 41% (or 40% if you aren't Scottish resident for tax purposes) on this pension withdrawal and could also be caught by the High Income Child Benefit Charge (if applicable).

LouisT_45

You are a wiz

I earn £30,100 so would it be better to take say £10,000 annually?

Alexland

Generally it would be better to draw a pension gradually in retirement when you have lower other income. Do you have other pension(s) that would alongside the SP use up your full annual personal allowance each year? Assuming it's a DC scheme would the imposition of the MPAA cause you a problem?

Dazed_and_confused

I earn £30,100 so would it be better to take say £10,000 annually?

Overall you would pay less tax.

But what about the reason you were going to take the whole lot, does that not matter now?

As Alexland says there are a lot of other things to consider, the MPAA is often seen as a negative but ultimately it all comes down to your own circumstances.

If you unsure what is the best way forward have you considered getting professional advice, either paid for (IFA not FA) or somewhere like Pension Wise (not formal advice but likely to help you understand the pitfalls and potential issues you might be creating for yourself).

And you need to give serious though to how emptying this pot now will affect you when you are actually retired.

LouisT_45

thanks

it is a small bit of cash to pay for the school fees before I get my hands on a good deal with the NHS

started a family later in life so despite being an older Dad I hope be a not too broke

cheers guys