Taking annual UFPLS lump sums

PowerSavingMode

I've just spent too much fun tapping away into an online pension withdrawal tax calculator. It's telling me that if I were in the position right now where I *could* take a tax-free lump sun on a yearly basis without triggering the income tax threshold, I could take £16,760.00 each year without having to pay any tax as long as there was no other income. Is that right? What if I had savings interest income of around £2,000 per annum?

Dazed_and_C0nfused

PowerSavingMode said:

I've just spent too much fun tapping away into an online pension withdrawal tax calculator. It's telling me that if I were in the position right now where I *could* take a tax-free lump sun on a yearly basis without triggering the income tax threshold, I could take £16,760.00 each year without having to pay any tax as long as there was no other income. Is that right? What if I had savings interest income of around £2,000 per annum?

That wouldn't just be taking a tax free lump sum though.

It would be a mix of TFLS and taxable income.

If you haven't applied for Marriage Allowance and only sources of (taxable) income were pension £12,570 and interest of £2,000 then all the interest would be taxed.  But at a 0% tax rate (the savings starter rate).

So ultimately no tax to pay.

Albermarle

The £16,760 is made up of £12,570 taxable income and £4,190 tax free cash.

If you have no other income and have the standard personal allowance, then will not pay any tax on the taxable income.

However the provider may well take some tax off your payment, which you would have to claim back from HMRC.

PowerSavingMode

Thank you Dazed_and_C0nfused and Albermarle for your input. Much appreciated. It all seems a tad clearer now...

bownyboy

Just to add. My wife has done an single UFPLS for the last three years. Tax is taken off and you have to claim it back using form P55.

Last two years it was sorted in 4 weeks or so.

This year? Still waiting and the date keeps moving, currently 8th September. 

leosayer

More info on the taxation of savings interest here:

https://www.moneysavingexpert.com/savings/tax-free-savings/

PowerSavingMode

Thank you bownyboy and leosayer — that's very helpful and good to know for future.

Marcon

PowerSavingMode said:

I've just spent too much fun tapping away into an online pension withdrawal tax calculator. It's telling me that if I were in the position right now where I *could* take a tax-free lump sun on a yearly basis without triggering the income tax threshold, I could take £16,760.00 each year without having to pay any tax as long as there was no other income. Is that right? 

No. You could have income from a non-taxable source such as an ISA of any amount.

A more accurate wording would be something along the lines of  '...without having to pay any tax as long as you had no other potentially taxable income in the same tax year'.

Qyburn

PowerSavingMode said:

I could take £16,760.00 each year without having to pay any tax as long as there was no other income. Is that right? What if I had savings interest income of around £2,000 per annum?

You could have savings interest of up to £6,000 and still pay no tax.