State Pension deferred tax liabilities

Miffey1946

I have a substantial deferred state pension lump sum £100k+ as I continued to work after my retirement age and also had an NHS Pension.  Having now retired completely I am looking to claim my state pension - but wish to take the lump sum.  I am getting confused responses from both the tax office and the pensions people!  My tax liability will reduce to the 20% bracket but have just been advised by a tax office person I may be liable to 45% rate if I take the lump sum (lump sum + state pension + NHS pension).  Whereas the letter from the pensions office (DWP) the amount of tax liability at the time the claim for state pension is the current liability = 20%.  Can anyone clarify

Dazed_and_C0nfused

Pre 2016 State Pension deferral lump sums have their own special tax rules.

They are not added to your other taxable income in the normal way, they are taxed at your marginal rate ignoring the lump sum.

In this context you must ignore 0% tax rates.  So someone with taxable income of say £14,000 but who is not liable to tax because of the savings starter rate band would be deemed a basic rate payer for State Pension lump sum purposes.

xylophone

See below

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums

Marcon

xylophone said:

See below

https://www.litrg.org.uk/pensions/state-pension/tax-state-pension/tax-deferred-state-pension-lump-sums

^^^This. It's essential reading before you commit to taking your state pension benefits.

Miffey1946

Thanks to everyone who replied - you put us directly to the right information which answered our question we know now what to do and what should happen viz tax liabilities
Many many thanks

Dazed_and_C0nfused

Miffey1946 said:

Thanks to everyone who replied - you put us directly to the right information which answered our question we know now what to do and what should happen viz tax liabilities
Many many thanks

I would suggest you triple check your calculations before taking the plunge.

A very costly error one poster made a few years ago was to forget to include the normal State Pension payments due in the remainder of the current tax year.

That either tipped them over from being a non taxpayer to basic rate or from basic rate to higher rate but it cost a lot of tax.

With a lump sum of £100k+ you would be looking at an extra £20k+ if you end up in the wrong rate band!