Pension withdrawal

downhillian

My wife is looking to withdraw some money from her pension fund to bring her up to the income tax threshold for 24/25 of £12570. She has earned £3675.07 this tax year. Am I right in saying that she can withdraw £8894.93 without having an income tax liability? I am a little confused as I know 25% of pension withdrawals is tax free anyway so can I therefore withdraw slightly more?

Sarahspangles

Yes, you withdraw a taxable payment to make up the difference to £12,570. That’s the 75% taxable, divide that by 3 and that’s the amount you need to add for the 25% tax free.

dunstonh

Its also worth noting that most platforms/providers have their cut off this week to get in on time for this tax year where the draw is not already held in cash.

Dazed_and_C0nfused

downhillian said:

My wife is looking to withdraw some money from her pension fund to bring her up to the income tax threshold for 24/25 of £12570. She has earned £3675.07 this tax year. Am I right in saying that she can withdraw £8894.93 without having an income tax liability? I am a little confused as I know 25% of pension withdrawals is tax free anyway so can I therefore withdraw slightly more?

If she wants to make her pension fund last a little longer is applying for Marriage Allowance an option?

If she applies for the current tax year it drops her Personal Allowance to £11,310 but if you are a basic rate payer it could save you £252.

Hoenir

Leaving it extremely late to get this transaction processed in the current tax year. Very busy at this time of the year. Now just 14 working days left.....

downhillian

Sarahspangles said:

Yes, you withdraw a taxable payment to make up the difference to £12,570. That’s the 75% taxable, divide that by 3 and that’s the amount you need to add for the 25% tax free.

Sorry to be slow....so how much does she withdraw?

downhillian

dunstonh said:

Its also worth noting that most platforms/providers have their cut off this week to get in on time for this tax year where the draw is not already held in cash.

dunstonh said:

Its also worth noting that most platforms/providers have their cut off this week to get in on time for this tax year where the draw is not already held in cash.

Thanks...can you explain what you mean by 'the draw'?

downhillian

Dazed_and_C0nfused said:

downhillian said:

My wife is looking to withdraw some money from her pension fund to bring her up to the income tax threshold for 24/25 of £12570. She has earned £3675.07 this tax year. Am I right in saying that she can withdraw £8894.93 without having an income tax liability? I am a little confused as I know 25% of pension withdrawals is tax free anyway so can I therefore withdraw slightly more?

If she wants to make her pension fund last a little longer is applying for Marriage Allowance an option?

If she applies for the current tax year it drops her Personal Allowance to £11,310 but if you are a basic rate payer it could save you £252.

Can you please explain what the marriage allowance option is?

Dazed_and_C0nfused

downhillian said:

Sarahspangles said:

Yes, you withdraw a taxable payment to make up the difference to £12,570. That’s the 75% taxable, divide that by 3 and that’s the amount you need to add for the 25% tax free.

Sorry to be slow....so how much does she withdraw?

If she uses UFPLS then out of every £100 she takes that would be £25 TFLS and £75 taxable pension income.

A TFLS is exactly that, irrelevant for income tax purposes.

Dazed_and_C0nfused

downhillian said:

Dazed_and_C0nfused said:

downhillian said:

My wife is looking to withdraw some money from her pension fund to bring her up to the income tax threshold for 24/25 of £12570. She has earned £3675.07 this tax year. Am I right in saying that she can withdraw £8894.93 without having an income tax liability? I am a little confused as I know 25% of pension withdrawals is tax free anyway so can I therefore withdraw slightly more?

If she wants to make her pension fund last a little longer is applying for Marriage Allowance an option?

If she applies for the current tax year it drops her Personal Allowance to £11,310 but if you are a basic rate payer it could save you £252.

Can you please explain what the marriage allowance option is?

In simple terms your wife would be agreeing to a reduced Personal Allowance (£11,310 instead of £12,570).  In return you get a reduction of £252 from your tax liability.  If you only pay say £200 in tax then it will only save you £200.  

This is quite a good explanation.  She can apply year by year, it's not forever.

https://www.litrg.org.uk/tax-nic/income-tax/tax-allowances/marriage-allowance-transferable-tax-allowance

Scrounger

downhillian said:

My wife is looking to withdraw some money from her pension fund to bring her up to the income tax threshold for 24/25 of £12570. She has earned £3675.07 this tax year. Am I right in saying that she can withdraw £8894.93 without having an income tax liability? I am a little confused as I know 25% of pension withdrawals is tax free anyway so can I therefore withdraw slightly more?

Withdraw £11,859.91 using UFPLS* (includes 25% tax free lump sum)

[*UFPLS stands for "Uncrystallised Funds Pension Lump Sum", a flexible way to access your pension without going into drawdown or buying an annuity, allowing you to take lump sums from your pension pot with 25% tax-free and the remaining taxed as income.]


Scrounger