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UFPLS & October budget advice please
Comments
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blomft said:Linton
thanks for response, TP = Teachers Pension.
Point 2: that's right, not planning on any future Pension contributions
Point 1: concerned with what you say about being too high, Do you mean that the £11000 received in say, October, plus other income could push me into Higher tax bracket for that month only? (over the year I won't be earning that much). That might require me to take it out in two lump sums, no?
However for your first ever taxable income from an "employer" HMRC will not have allocated a tax code and so the emergency tax code of 1257LX is normally used, the X meaning treat each month individually. In your case PAYE will see you getting approx £8K income with a tax allowance of around £1000 and a higher rate band starting at around £4K. So you will be well into higher rate tax and taxed accordingly in that month
HMRC will then issue a tax code and the calculation will be switched to cumulative. So further income from that "employer" would leads to a tax recalculation with possibly a refund. But in your case there is no further income. It would naturally all be sorted out at the end of the tax year when HMRC can see your total income and total tax paid and so calculate the tax due accurately.
In your case there is the complexity of SP which is taxable with the tax due taken from your other income streams. This would lead to HMRC issuing new tax codes. This may help your situation.
You could wait for the end of the tax year. However you can claim the excess tax early using form P53 (Google for full details and copy of form) or you could spread the drawdown over several months after the initial taxcode for the pension has been allocated.
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blomft said:Hi All,
I just need advice on one question please. I have an old small pension pot (£11000) and I'm thinking of taking it all out before the potential removal of the 25% Tax free allowance in October.
I am 3 weeks away from State pension and I have TP of c£8000. I am also doing some PT work at present.
Going forward, I will now always be over my Tax allowance, so this year should be the optimal time to take this pot (as I'll only get 5 months State pension). Plus the fact that I may need the money soon if we move house.
I can't see any reason not to do this now, after all it's a small amount in the scheme of things, but it'll be too late once I pull the trigger. Am I missing something?
Many Thanks in advance
You could even 'recycle' up to £7,500 back into a SIPP (instant 6.25% gain) and the rest into an ISA if you so desired.El_Torro said:I very much doubt that the next Budget will scrap the 25% tax free lump sum you can take. If it does then I can't see it coming into force before the new tax year (6th of April 2025).
I've already taken my tax tax free sums and recycled within the limits, the Mrs is in the process of doing so.
Best wishes in your retirement.
Scrounger
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Scrounger said:You could even 'recycle' up to £7,500 back into a SIPP
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You just need to remember that taking this amount in one go will trigger the MPAA, even though you don't pay tax on the amount. So going forward you would be limited to £10kpa total pension contributions, whatever your gross salary.Probably wouldn't be a problem, but has to be watched out for.0
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LHW99 said:You just need to remember that taking this amount in one go will trigger the MPAA, even though you don't pay tax on the amount. So going forward you would be limited to £10kpa total pension contributions, whatever your gross salary.Probably wouldn't be a problem, but has to be watched out for.
that hadn't occurred to me as a thing to do.1 -
Linton said:blomft said:Linton
thanks for response, TP = Teachers Pension.
Point 2: that's right, not planning on any future Pension contributions
Point 1: concerned with what you say about being too high, Do you mean that the £11000 received in say, October, plus other income could push me into Higher tax bracket for that month only? (over the year I won't be earning that much). That might require me to take it out in two lump sums, no?
However for your first ever taxable income from an "employer" HMRC will not have allocated a tax code and so the emergency tax code of 1257LX is normally used, the X meaning treat each month individually. In your case PAYE will see you getting approx £8K income with a tax allowance of around £1000 and a higher rate band starting at around £4K. So you will be well into higher rate tax and taxed accordingly in that month
HMRC will then issue a tax code and the calculation will be switched to cumulative. So further income from that "employer" would leads to a tax recalculation with possibly a refund. But in your case there is no further income. It would naturally all be sorted out at the end of the tax year when HMRC can see your total income and total tax paid and so calculate the tax due accurately.
In your case there is the complexity of SP which is taxable with the tax due taken from your other income streams. This would lead to HMRC issuing new tax codes. This may help your situation.
You could wait for the end of the tax year. However you can claim the excess tax early using form P53 (Google for full details and copy of form) or you could spread the drawdown over several months after the initial taxcode for the pension has been allocated.
I am likely to be earning more next year though.0 -
It can take a couple of weeks to activate the process and get the money out, I recall HL said 14 days; those concerned to make a withdrawal before the announcement should probably have done it by now, or do it today, tomorrow, as soon as possible and might even be too late.0 -
blomft said:LHW99 said:You just need to remember that taking this amount in one go will trigger the MPAA, even though you don't pay tax on the amount. So going forward you would be limited to £10kpa total pension contributions, whatever your gross salary.Probably wouldn't be a problem, but has to be watched out for.
that hadn't occurred to me as a thing to do.0 -
Albermarle said:blomft said:LHW99 said:You just need to remember that taking this amount in one go will trigger the MPAA, even though you don't pay tax on the amount. So going forward you would be limited to £10kpa total pension contributions, whatever your gross salary.Probably wouldn't be a problem, but has to be watched out for.
that hadn't occurred to me as a thing to do.0 -
blomft said:Albermarle said:blomft said:LHW99 said:You just need to remember that taking this amount in one go will trigger the MPAA, even though you don't pay tax on the amount. So going forward you would be limited to £10kpa total pension contributions, whatever your gross salary.Probably wouldn't be a problem, but has to be watched out for.
that hadn't occurred to me as a thing to do.
So if you still worked, took the 25% tax free you could contribute up to the maximum of your total relevant income. Until such time as you used any of your DC pension income.0
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