Tax efficient pension strategy advice please

Dazed_and_C0nfused

The MSE article is wrong.

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

You can have tax code allowances greater than £12,500 which is how HMRC ensure people can receive the benefit of Marriage Allowance during the year but tax codes are just a provisional attempt to collect the correct amount of tax and when calculating the actual position after the end of the tax year the maximum Personal Allowance is £12,500.

Whatever tax is due will be reduced by £250 (or less if the tax due is less).

This is a much better, more accurate explanation.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled

pensionpawn

Dazed_and_C0nfused said:

The MSE article is wrong.

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

You can have tax code allowances greater than £12,500 which is how HMRC ensure people can receive the benefit of Marriage Allowance during the year but tax codes are just a provisional attempt to collect the correct amount of tax and when calculating the actual position after the end of the tax year the maximum Personal Allowance is £12,500.

Whatever tax is due will be reduced by £250 (or less if the tax due is less).

This is a much better, more accurate explanation.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled

Yes, that is the best explanation I've seen so far. A related issue I am trying to clarify is this. Spouse A receives the marriage allowance from spouse B (as a tax credit). Both are retired and with spouse A accessing their pension through UFPLS and spouse B in post crystallisation drawdown having taken the full 25% TFLS. So the question is: is spouse B now limited to only taking 90% of the PA out of their pension due to the marriage allowance transfer or can they take an occasional larger (and taxable) sum out of their pension from time to time without falling fowl or any rules, regulations or laws?

Dazed_and_C0nfused

From a tax perspective all they need to do is ensure they do not become classed as a higher rate payer.  The LITRG articles covers this I think as it isn't quite as simple as actually not paying higher rate tax.

If they took say £14,000 taxable pension income then they would pay tax on £2,750 (£14,000 less Personal Allowance £11,250).

And their savings starter rate band would only be £2,250 not £5,000.

Albermarle

Dazed_and_C0nfused said:

The MSE article is wrong.

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

You can have tax code allowances greater than £12,500 which is how HMRC ensure people can receive the benefit of Marriage Allowance during the year but tax codes are just a provisional attempt to collect the correct amount of tax and when calculating the actual position after the end of the tax year the maximum Personal Allowance is £12,500.

Whatever tax is due will be reduced by £250 (or less if the tax due is less).

This is a much better, more accurate explanation.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled

Good article but as it is the 'low income tax reform group; the example they used was not quite in line with their name.

Example

In the tax year 2020/21 John, who lives in England, has a state pension and private pension totalling £49,000. He also has dividend income of £2,000. 

Dazed_and_C0nfused

Albermarle said:

Dazed_and_C0nfused said:

The MSE article is wrong.

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

You can have tax code allowances greater than £12,500 which is how HMRC ensure people can receive the benefit of Marriage Allowance during the year but tax codes are just a provisional attempt to collect the correct amount of tax and when calculating the actual position after the end of the tax year the maximum Personal Allowance is £12,500.

Whatever tax is due will be reduced by £250 (or less if the tax due is less).

This is a much better, more accurate explanation.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled

Good article but as it is the 'low income tax reform group; the example they used was not quite in line with their name.

Example

In the tax year 2020/21 John, who lives in England, has a state pension and private pension totalling £49,000. He also has dividend income of £2,000. 

True but I think they needed to have an example where taxable income exceeded £50,000 to illustrate a niche point.