Tax free pension lump sum

Bakingmadboy

I’m a 20% tax payer but within 15000 of paying 40%. I’m about to take my 25% tax free allowance from my iwdc pension scheme which would essentially push me into the 40% bracket, despite this being a tax free allowance it will be paid to me through my wages  I presume. Does this mean that I’ll be taxed at 40% for next year and have to claim it back from our good old hmrc tax office or will it not have any effect?

Dazed_and_C0nfused

Why do you think a tax free lump sum is taxable 🤔

MallyGirl

why would it be paid through your wages?

SVaz

Will it not be a seperate payment?
Regardless of whether it’s in your wages or not, it’s Tax free,  so it may possibly say taxed at 0% or something.   

Cobbler_tone

The clue is in your thread title.

QrizB

We've had a few threads recently with people asking how much tax they need to pay on their tax-free lump sums. It's puzzling. Is there something going around on social media about it, or something?

Cobbler_tone

QrizB said:

We've had a few threads recently with people asking how much tax they need to pay on their tax-free lump sums. It's puzzling. Is there something going around on social media about it, or something?

There does seem to be a growing number of strange and basic questions. Not a bad thing though if it helps to inform people and especially if it prevents misguided decisions. You only know what you know!

SVaz

People do seem to be confused,  they get mixed up with UFPLS I think.   

Bakingmadboy

Thanks for all your replies and really I’m not stupid but just the fact not knowing how my tax free lump sum is paid to me rings alarm bells because the tax office may just see it as me having an incredibly rich month and taxing accordingly, however if it’s paid direct to my bank account then happy days no need to worry about. I guess my first question should have been can anyone tell me how it’s paid? Ho hum hindsight really is a wonderful thing .😊

MallyGirl

I don't know what an iwdc pension scheme is. Is this your current work pension? If so, are you still contributing to it? If yes, does it support you taking some out while still contributing?

Albermarle

Bakingmadboy said:

Thanks for all your replies and really I’m not stupid but just the fact not knowing how my tax free lump sum is paid to me rings alarm bells because the tax office may just see it as me having an incredibly rich month and taxing accordingly, however if it’s paid direct to my bank account then happy days no need to worry about. I guess my first question should have been can anyone tell me how it’s paid? Ho hum hindsight really is a wonderful thing .😊

Normally would be paid by bank transfer, assuming they have your current account details.