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Quick Question about taking money out of pension...

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Say I have a pot of £100,000 - I can take 25% ( 25k tax free ), then the rest is subject to 20% tax.

But if I take another 25k out, does the pension provider chop off the £5k and only pay me £20k, or do they give me the £25k but I have to report it to HMRC as income and that then gets charged at 20% ( and if I have no other income would I get 12,700 odd tax free ? ).

If the PP chop of the £5k and just give me £20, do I then get taxed on that again at what ever the prevailing rate is applicable to me circumstances?

Thanks

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  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,989 Forumite
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    DE_612183 said:
    Say I have a pot of £100,000 - I can take 25% ( 25k tax free ), then the rest is subject to 20% tax.

    But if I take another 25k out, does the pension provider chop off the £5k and only pay me £20k, or do they give me the £25k but I have to report it to HMRC as income and that then gets charged at 20% ( and if I have no other income would I get 12,700 odd tax free ? ).

    If the PP chop of the £5k and just give me £20, do I then get taxed on that again at what ever the prevailing rate is applicable to me circumstances?

    Thanks
    The rest isn't subject to 20% tax, the tax due depends on your other taxable income (and types of income).  It might be 20% but possibly not.

    The emergency code (1257L) is used on the first taxable payment and on £25k they would deduct £9,628.

    If you owed more you would be responsible for paying the extra to HMRC.  If you were due a refund you could make a claim from HMRC or simply wait for HMRC to refund it after the end of the tax year (unless you have to file a Self Assessment return this happens automatically). 

    You would never get taxed twice and any "gain" isn't taxable, that's tax free within the pension, you only pay tax on the taxable income you take out of the pension.
  • lisyloo
    lisyloo Posts: 29,739 Forumite
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    edited 24 April at 10:31AM
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    The rest is subject to normal income tax taking into account your other income.
    So £12570 is at 0%, some more at 20% and at higher rate 40%.

    You get a personal allowance if you haven't used it already.
    You won't have to pay tax twice.

    Providers don't know your circumstances and won't be willing to deal with tax on an individual basis.
  • Mr.Generous
    Mr.Generous Posts: 3,518 Forumite
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    On your withdrawal you can tell them you want £xx from the pot before tax, and they pay the net sum, or £xx after tax, and they draw down enough to meet your request after tax - if that's what you meant.
    Mr Generous - Landlord for more than 10 years. Generous? - Possibly but sarcastic more likely.
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