Lump Sum from deferred pension

calcotti

Dazed_and_C0nfused said: Don't forget though that her Personal Allowance may only be £11,250.

Why might it only be £11,250?

Dazed_and_C0nfused

The Personal Allowance for most people is either £11,250 or £12,500.

£11,250 for those that have applied for Marriage Allowance.

You cannot have a Personal Allowance greater than £12,500 but it will be less (potentially £0) if your adjusted net income exceeds £100,001.

calcotti

Dazed_and_C0nfused said: £11,250 for those that have applied for Marriage Allowance.

Thanks.

awaw76

Dazed_and_C0nfused said:

It isn't quite that simple - for example if she was say liable to one of the 0% tax rates on savings income then she would have to pay basic rate tax on the lump sum even though she may not actually be a "taxpayer" in the normal sense.

You do not include the State Pension Lump sum when calculating her tax rate.

Don't forget though that her Personal Allowance may only be £11,250 and you must include the normal State Pension payments when calculating her taxable income.

Who can tell me definitively? Will the work and pensions dept tell me or will they say its HMRC - get in touch with them or do I need to use and accountant?
If we took the extra income that would be an extra £50 pw which would still make it that she is under the threshold of 12.5k.

Dazed_and_C0nfused

Tell you what definitively?

If you mean which is the best choice only you and your wife knows the answer to that.

You need to consider life expectancy as well as the tax implications (or seeming lack of them).

garmeg

Dazed_and_C0nfused said:

The Personal Allowance for most people is either £11,250 or £12,500.

£11,250 for those that have applied for Marriage Allowance.

You cannot have a Personal Allowance greater than £12,500 but it will be less (potentially £0) if your adjusted net income exceeds £100,001.

you forgot ... or £13,750 (extra having been received from those applying for marriage allowance) because the same number will have this higher code as will have the £11,250 code because there is a 1-1 relationship between the number of recipients of both tax allowances. 

Dazed_and_C0nfused

garmeg said:

Dazed_and_C0nfused said:

The Personal Allowance for most people is either £11,250 or £12,500.

£11,250 for those that have applied for Marriage Allowance.

You cannot have a Personal Allowance greater than £12,500 but it will be less (potentially £0) if your adjusted net income exceeds £100,001.

you forgot ... or £13,750 (extra having been received from those applying for marriage allowance) because the same number will have this higher code as will have the £11,250 code because there is a 1-1 relationship between the number of recipients of both tax allowances. 

I think you are getting confused between tax code allowances, which are an initial attempt to ensure the correct tax paid is during the year, and the Personal Allowance.

You cannot have a Personal Allowance greater than £12,500.

Recipients of Marriage Allowance get a tax deduction of £250* off their income tax liability, not any extra allowances.
*£1,250 x 20%

For most people it makes no difference but this is one situation (State Pension Lump Sum) where it could make a huge difference.