Tax on Pension

redmalc

My wife is a non taxpayer and has a small pension pot of £7500, if we withdraw the full amount will she be taxed on it

molerat

She will likely have tax deducted at the time due to the way pension tax works but will be able to reclaim it if it falls within her tax allowance.  Does she have other income ? Non tax payer and non earner are completely different.

redmalc

My wife became of pension age last week and will be getting state pension from then, she has had no other income since 2012

Albermarle

redmalc said:

My wife became of pension age last week and will be getting state pension from then, she has had no other income since 2012

State pension is taxable, but if she only just started getting it now, then in the current tax year, she will only get < £2K.
So as long as you take the £7500 this tax year, then she will pay no tax. If you wait until the next tax year then she will pay some tax .

redmalc

Albermarle, that was my reason for taking the pension this year, however we called the pension company yesterday and they advised the tax would be stopped at source, I expect we will have to then apply to HMRC for its return

Dazed_and_C0nfused

redmalc said:

Albermarle, that was my reason for taking the pension this year, however we called the pension company yesterday and they advised the tax would be stopped at source, I expect we will have to then apply to HMRC for its return

You don't need to apply for a refund.

It will be automatically refunded later this year.

https://www.gov.uk/tax-overpayments-and-underpayments