Tax efficiency

Shiptoshaw

Hi
All
Planning to retire in 2 years was going to send 25k to investec 2.35% two years fixed , then I was thinking pensions + the government 25% uptake the question is hypothetical when I start to draw down from pension pots could I take up to my tax code ie 11850 plus 25% tax free giving me a figure of £14812 to draw annually without incurring any income tax

Dazed_and_confused

Do you mean £15,800??

Shiptoshaw

Yes thanks thats the figure fat finger syndrome I’m afraid

Dazed_and_confused

Your theory looks ok in the sense it would work if you had no other wages or pension income whatsoever in the tax years concerned (you could have some savings interest and dividend income as well but that, subject to set limits, would then fall to be taxed at one of the various 0% tax rates).

But there are other factors to consider such as bringing the £4k contribution limit into play by taking a taxable element.

Shiptoshaw

Yeah thanks would have no other wages or pension income , interest & dividends would be under the 1k limit , no plans to further to contribute once we retire but what’s the tax implications if I was to contribute while “retired”?????? Re max withdrawal without incurring income tax
Alan

Dazed_and_confused

If that was your only income you almost certainly wouldn't be able to benefit from the Personal Savings Allowance rate band as that cannot be used by people with lower incomes.

Instead you would be using the savings starter rate of tax. Which is upto £5,000 of interest taxable at 0%.

Only after your Personal Allowance and savings starter rate of tax had been used do you get to the point where the second 0% rate applies (confusingly called the Personal Savings Allowance).

AnotherJoe

OP, your basic supposition, if not maths is correct, a few of us here doing that between stopping earning and getting state pension.