Tax in and out of pensions

mark1959

I also don't pay any tax on my pension. £16500 P.A.

NoMore

mark1959 wrote: »

I also don't pay any tax on my pension. £16500 P.A.

Instead of doing a clever wink to make people think you are some kind of genius, maybe try explaining how!

Like every year you crystallise the amount to give you the Personal Allowamce (currently 12500 ) and then 25% tax free on top, this works because you have no other sources of income.

Your probably missing out on 166.67p per year as well

bigadaj

NoMore wrote: »

Instead of doing a clever wink to make people think you are some kind of genius, maybe try explaining how!

Like every year you crystallise the amount to give you the Personal Allowamce (currently 12500 ) and then 25% tax free on top, this works because you have no other sources of income.

Your probably missing out on 166.67p per year as well

Isas are of course tax free for example.

Dazed_and_confused

Like every year you crystallise the amount to give you the Personal Allowamce (currently 12500 ) and then 25% tax free on top, this works because you have no other sources of income.

Your probably missing out on 166.67p per year as well

And have chosen not to take the TFLS up front. Which may or may not be the best option.

It is possible to have 100% taxable income of £20,500 in the current tax year and pay no tax on it. Add-on the TFLS when it is being taken with each pension payment and you can reach £24,666.

If you are an elderly married man and have the right types of taxable income you could be getting more than £30k before any tax would actually be payable.

nigelbb

Dazed_and_confused wrote: »

And have chosen not to take the TFLS up front. Which may or may not be the best option.

It is possible to have 100% taxable income of £20,500 in the current tax year and pay no tax on it. Add-on the TFLS when it is being taken with each pension payment and you can reach £24,666.

If you are an elderly married man and have the right types of taxable income you could be getting more than £30k before any tax would actually be payable.

Interesting. Can you explain these figures please?

PJM_62

Very interesting.
Please enlighten us.

Dazed_and_confused

Ignoring non taxable/tax free income such as the TFLS then the £20,500 works as follows,

Pension/wages/rents etc £12,500
Savings interest £6,000
Dividends £2,000
Total income £20,500
Less Personal Allowance £12,500
Income to be taxed £8,000

£5,000 x 0% = £0.00 (savings starter rate)
£1,000 x 0% = £0.00 (savings nil rate)
£2,000 x 0% = £0.00 (dividend nil rate)

Total tax payable = £0.00

Dazed_and_confused

If you are the recipient of Marriage Allowance then the £20,5000 can become £23,833.

Pension/wages/rents etc £12,500
Savings interest £6,000
Dividends £5,333
Total income £23,833
Less Personal Allowance £12,500
Income to be taxed £11,333

£5,000 x 0% = £0.00 (savings starter rate)
£1,000 x 0% = £0.00 (savings nil rate)
£2,000 x 0% = £0.00 (dividend nil rate)
£3,333 x 7.5% = £249.97 (dividend lower/basic rate)

Total tax charged £249.97
Less Marriage Allowance tax credit £250.00
Total tax payable = £0.00
NB. The £0.03 unused Marriage Allowance is lost, it isn't refundable :mad:

Dazed_and_confused

And if you are entitled to Married Couple's Allowance then it could be £31,270

Pension/wages/rents etc £12,500
Savings interest £6,000
Dividends £12,770
Total income £31,270
Less Personal Allowance £12,500
Income to be taxed £18,770
£5,000 x 0% = £0.00 (savings starter rate)
£1,000 x 0% = £0.00 (savings nil rate)
£2,000 x 0% = £0.00 (dividend nil rate)
£10,770 x 7.5% = £807.75 (dividend lower/basic rate)

Total tax charged £807.75
Less Marriage Couple's Allowance tax credit £808.00
Total tax payable = £0.00

climbatron

Thanks for the clarification. What I was after, and has been confirmed, is that the majority of publications (including MSE) highlight the 20% tax relief on the way in and don't mention that you get taxed again on the way out.