Cashing in pension

Liz65

Hi, my husband has a workplace pension and two other separate small pensions.

He wants to cash in one of them so we can improve our house but we are worried about how we pay the tax on the pension that is withdrawn.  Are there forms you have to fill in on government website and can we pay the tax on the pension in a lump sum from the money withdrawn or does it get classed as income for the year and taxed that way?  We know people will say it isn’t wise to cash in a pension but we do not want any debt.  Thanks in advance.

Dazed_and_C0nfused

Liz65 said:

Hi, my husband has a workplace pension and two other separate small pensions.

He wants to cash in one of them so we can improve our house but we are worried about how we pay the tax on the pension that is withdrawn.  Are there forms you have to fill in on government website and can we pay the tax on the pension in a lump sum from the money withdrawn or does it get classed as income for the year and taxed that way?  We know people will say it isn’t wise to cash in a pension but we do not want any debt.  Thanks in advance.

PAYE is operated by the pension company, just in the same way an employer would.

For a first payment the emergency tax code (1257L) will be used on a non-cumulative basis.

So for small amounts no tax will be deducted but for larger ones too much tax might be deducted.  

HMRC will automatically refund any tax overpaid after the end of the tax year.  Or your husband can claim a provisional refund from HMRC after the payment has been made by the pension company.

What sort of amount (the taxable bit) are you taking about and what other taxable income does he have?

Could the total pot he intends to cash in be less than £10k?

Does he know about MPAA?

TadleyBaggie

How old is he? Accessing a pension if under 55 is not possible, except under exceptional circumstances.

Ignore, answered in a previous thread:  https://forums.moneysavingexpert.com/discussion/6523301/cashing-in-pensions#latest

xylophone

He wants to cash in one of them

Have you yet established whether the pension in question is DB or DC?  See your previous thread referenced above.

Triumph13

The other question is will the taxable 75% of the pension push your husband into a higher tax band for the year?  If so it might be much better to withdraw it over more than one year.