Small Pension Pot

r1dgeback

Hi


My wife is just about to turn 65, hasn't earned any income for 3yrs.


Her x Works pension is due to mature, pot value £7600 in total.


She is thinking of cashing in the whole pot, I'm aware that she is allowed 25% of the pot Tax free but will she have to pay tax on the other 5k. If it's taxed at source could she then claim it back.


Thanks

AlanP_2

Taxed at source and then reclaim.

Amounts will depend on overall income but sounds like you should get it all back from information that you have given.

r1dgeback

Thanks for your help

Dazed_and_confused

On a taxable withdrawal of £5,700 in the current tax year the tax deducted will be £1237.80.

She can either claim it back by completing a form or HMRC will automatically refund any tax overpaid after the end of the tax year.

r1dgeback

Why would that be, I thought Basic tax rate was 20%

Dazed_and_confused

The pension company will operate the emergency tax code (1250L), on a non cumulative basis, on the first payment.

Most pension payments seem to be made on a monthly basis so a month's worth of the Personal Allowance will be given. And a months worth of the basic rate band.

As she is taking the annual equivalent of £68,400 she will pay,
nothing on about £1,042
20% tax on £3,125
40% tax on £1,533

r1dgeback

Again thank you for your help, wife's Pension company has just came back with nearly the same answer.


Kindest regards

Dazed_and_confused

Thanks. Nice to get an update

r1dgeback

That's interesting, just thought I would update again.


Wife has just received letter in post today and the amount is being paid into her Bank Account and the Pension Company has applied the tax code BR also P45 etc, so taxable amount was 20%.