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Tax on lump sum state pension
Msbethj
Posts: 5 Forumite
Hi
I’m 71 this year and have 11 years’ worth of state pension that I have not taken - around £60k. I’m currently working 21 hours a week and therefore paying standard tax on my salary.
If I retire this month, so in financial year 2018/2019, and take my lump sum in June, will I be liable for tax on it?
Obviously the first £12k per year is tax free, but from what I understand you are charged the amount of tax on the lump sum that you pay typically. If I take it in June, I will not have paid any tax in that financial year, and therefore will be a 0% tax payer.... so would that mean I don’t pay any tax on the lump sum?
I’m 71 this year and have 11 years’ worth of state pension that I have not taken - around £60k. I’m currently working 21 hours a week and therefore paying standard tax on my salary.
If I retire this month, so in financial year 2018/2019, and take my lump sum in June, will I be liable for tax on it?
Obviously the first £12k per year is tax free, but from what I understand you are charged the amount of tax on the lump sum that you pay typically. If I take it in June, I will not have paid any tax in that financial year, and therefore will be a 0% tax payer.... so would that mean I don’t pay any tax on the lump sum?
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Comments
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It isn't as simple as that.
First thing is to establish what taxable income you will have in the 2019:20 tax year. Presumably most of a year's worth of State Pension. What else? And all sources of taxable income count, you cannot pick and choose!
Even if you are liable to pay no tax on your other taxable income you could be due to pay tax on the State Pension lump sum.0 -
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Yes, the only other income other than the state pension weekly amount will be a small NHS pension that I’ve been taking for the last year. Both pensions together total around £10k per year.
I don’t have any other income0 -
That is very helpful - thank you so much.
Based on this, I would liken my situation to the example they’ve used for someone called Matthew. My overall income for 19/20 will be less than £12k (apart from the lump sum) and therefore no tax to be paid on it0 -
No interest, part time job, nothing at all?
If your circumstances change, say for example you do get a job or new pension, later in the same tax year it could have a huge affect.
20% tax on £60k would be £12k to pay.0 -
No part time job, nothing. Once I retire that will be it.
I do get a small amount of interest on an ISA but we are taking literally a few pounds... no more than £100 annually0 -
Hi,
an ISA is tax free anyway.0 -
Great result!!!!!!!!!!!!!!!!!!!!!!!10
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I presume you have considered taking extra state pension instead of a lump sum?0
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I have, but to get £60k with the extra amount per week they would offer, it would take me 20-30 years!0
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