Is it best to retire at end March - financial viewpoint

BikingBud

Bimbly said:

For income tax purposes, the end of the September is best because your six months of wages will be spread out across a whole year of tax allowances. So you should get a tax rebate.

Although, pension income is taxable, so if you immediately start drawing your pension, that will mitigate that. Therefore, probably best for people who are able to use savings for the following six months before drawing their pension. Or possibly those with only a small pension.

I'm intrigued why you think March would be best? I would have thought it was the worst financially speaking. The only advantage I can think of is the ease of making calculations for the financial year with regard to change in income.

Wouldn't the context for that be more accurate to say retire as soon as you have a tax liability rather than arbitrary 6 months?

As before there is a balance between cash needed and desire not to pay tax but if you earn enough in month one to have a tax liability then that will only increase during the year.

Also don't some pensions may give Index increases that decrease as a factor if you retired later in the year, eg 12/12 in Apr down to 1/12 in March.

So yes, there is too little info to really 

Anonymous101

I'd echo other comments so far. When I've thought about this I've always had in mind that working a few months of a tax year is best from a tax point of view as it allows you to allocate a full years tax allowances against a partial year of income. So especially beneficial for higher earners retiring early.
eg. £100k Salary working 6 months until Christmas would stay a basic rate tax payer, and gain a full years NI etc.

If you're no already in a position to retire then working another year or two is the best overall financially. Finishing at the end of a tax year does seem the worst time to retire though as none of the offsetting can occur.

Sarahspangles

SouthCoastBoy said:

If you continued with this theory you would never retire, as you are perpetually losing earnings, its the position I'm in. I could retire in march but what if I stayed for another 6 months? Personally when I finally retire I plan to leave mid June, as I will rack up another years state pension although I don't need it, just me being crazy and also will have used my personal tax allowance so will withdraw from isas for rest of year. 

@SouthCoastBoy It’s mid June tomorrow!

Saver73

I had in mind that March would be a good time to retire for two reasons. The first is that it's start of Spring into summer and the second I thought it would make it tidier in terms of tax.  

I know there are lots of variables and everyone's personal situation is different.

This thread has given me some useful ideas and info. 


 

Pat38493

Sarahspangles said:

SouthCoastBoy said:

If you continued with this theory you would never retire, as you are perpetually losing earnings, its the position I'm in. I could retire in march but what if I stayed for another 6 months? Personally when I finally retire I plan to leave mid June, as I will rack up another years state pension although I don't need it, just me being crazy and also will have used my personal tax allowance so will withdraw from isas for rest of year. 

@SouthCoastBoy It’s mid June tomorrow!

Do it! Do it! Do it!

Saver73 said:

I had in mind that March would be a good time to retire for two reasons. The first is that it's start of Spring into summer and the second I thought it would make it tidier in terms of tax.  

I know there are lots of variables and everyone's personal situation is different.

This thread has given me some useful ideas and info. 


 

There was a similar thread a month or two back and there were several posters who made this comment - a lot of the time it won’t make a huge difference financially but retiring in spring seems like a good moment.

Scrudgy

I am planning to finish work in March 2024, with my final PAYE salary in period 12 of this 23-24 tax year. I will already have enough cash put away to live on for April 2024 to March 2025. It is important to my plans to pay no tax from salary in the 24-25 tax year. 

Then in March period 12 of the 24-25 tax year I will take a single £43,662 lump sum (Scottish higher rate threshold) from my SIPP which will will be my income for the entire year. This is to ensure that I don’t pay any 42% tax.

For me, retiring in March makes perfect sense, and the purpose is entirely to avoid paying any higher rate tax in retirement from my SIPP pot. 

Pat38493

Scrudgy said:

I am planning to finish work in March 2024, with my final PAYE salary in period 12 of this 23-24 tax year. I will already have enough cash put away to live on for April 2024 to March 2025. It is important to my plans to pay no tax from salary in the 24-25 tax year. 

Then in March period 12 of the 24-25 tax year I will take a single £43,662 lump sum (Scottish higher rate threshold) from my SIPP which will will be my income for the entire year. This is to ensure that I don’t pay any 42% tax.

For me, retiring in March makes perfect sense, and the purpose is entirely to avoid paying any higher rate tax in retirement from my SIPP pot. 

Make sure you know how long it will take to execute the transaction especially if it’s your very first pension withdrawal.  You don’t want admin delays to tip it into the next tax year.

Sarahspangles

Mick70 said:

Is it best to retire at end of March , just before the new tax year starts ?  Purely from a financial / tax viewpoint 

OH retired last Summer but this didn’t imply he went from receiving a salary one month and pension the next. His pension commenced but it also took several months for the final payments for a pay rise, leave not taken and a share of bonus to come through. It didn’t matter in his case as he was always going to end up paying basic rate tax. But if someone had a plan to use the personal tax allowance to maximise tax-free drawdown from a SIPP this could scupper that.

Scrudgy

Pat38493 said:

Make sure you know how long it will take to execute the transaction especially if it’s your very first pension withdrawal.  You don’t want admin delays to tip it into the next tax year.

Thanks, I am planning to be careful about that. I am using interactive investor who have so far impressed me with the support they have provided with my transfer to their SIPP, however they want the money so they can start charging me fees, so definitely keen to help for that. I will be taking out some tax free cash in the next few months so that will give me an idea on timing for receiving payments I hope.

jimi_man

I recall in the OPs case he is in receipt of a DB pension of around £30k so he will always have a tax liability, even in retirement.