Using Crystallised Pension Funds in a First Time House Purchase - tax question

ABSP

I am wanting to withdraw my crystallized pension funds to purchase a home.  I will be a first time buyer at the age of 63.  As the pension is crystallized - I have already taken the 25% tax free over the years - is there any way that I can use the funds towards the purchase without losing a bulk of it to tax.  Thank you

SVaz

As far as I’m aware,  you will be taxed on every penny, (over and above your personal allowance) of your crystallised funds.
Seems an insane way to buy a house.  You’ll be taxed a mixture of 20%, 40% and 45% ! 

A 10 year mortgage would be a better option surely?
You should be able to stay at 20% tax that way. 

molerat

Your crystallized pension funds are regarded as taxable income as soon as they are withdrawn.  There is no way round paying tax on them.

SVaz

How much are you intending to spend on a property?   

Are you currently working/self employed and using up your personal allowance?  

dunstonh

every penny you draw from the pension will be subject to income tax above the personal allowance.  it is unavoidable as pensions are designed to be for income provision and are treated as such.

ABSP

Thank you to all.  In answer to a question posed.  We are aiming to buy a park home for £300K.  We are able to do this:  2/3 with the money we get from the sale of my mum's house after her death and 1/3 I hoped from my crystallised pension. 

ABSP

In answer to another question posed.  I have owned my own business for the past 10 years and we break even.  I have not made profits enough to be taxed on.  I have 2 smallish company pensions from previous employments that I use for income.

Dazed_and_C0nfused

ABSP said:

In answer to another question posed.  I have owned my own business for the past 10 years and we break even.  I have not made profits enough to be taxed on.  I have 2 smallish company pensions from previous employments that I use for income.

As you plan on taking £100k (net of tax) in taxable income then you really need to think very carefully (and understand) the tax implications as there can be a massive difference depending on how you do it.

You will have already used some/all of your Personal Allowance and possibly some of your basic rate band so £100k+ gross in one year compared to £50k+ in each of two tax years is something to think about.  You will be well into tapered Personal Allowance territory if you take it all in one tax year 😳.

Really you need to be taking much more than £100k so you end up with £100k after all the tax you will have to pay.

We are aiming to buy a park home for £300K. We are able to do this: 2/3 with the money we get from the sale of my mum's house after her death and 1/3 I hoped from my crystallised pension. 

Marcon

ABSP said:

I am wanting to withdraw my crystallized pension funds to purchase a home.  I will be a first time buyer at the age of 63.  As the pension is crystallized - I have already taken the 25% tax free over the years - is there any way that I can use the funds towards the purchase without losing a bulk of it to tax.  Thank you

Taking the lot in one tax year is going to be the worst from a tax perspective. Can you spread over more than one tax year and still achieve your objective of raising a net £100K?

xylophone

I have not made profits enough to be taxed on.  I have 2 smallish company pensions from previous employments that I use for income.

Is your income, though modest, in excess of your Personal Allowance so that you are paying some tax at basic rate (20%)?

Qyburn

ABSP said:

Thank you to all.  In answer to a question posed.  We are aiming to buy a park home for £300K.  We are able to do this:  2/3 with the money we get from the sale of my mum's house after her death and 1/3 I hoped from my crystallised pension. 

If you have no other income, to get £100k in one go after tax you'd need to take just under £160k from your pension.