Lump sum payment

NCox59

Hi, after some help please. I am drawing a lump sum from my pension (im still working full time). Im already a 40% tax payer (public sector employee) and the amount i receive from the withdrawal will push my income for the year into the 45% tax bracket. I know i have to pay HMRC the tax on the lump sum but what happens about my earnings for the rest of the year? Do i need to do anything else other than let my payroll know im now in the 45% bracket or complete a self assessment form?
 Any advice gratefully received

MeteredOut

As a taxpayer, I applaud you for paying this extra tax the country needs, but as a fellow human, do you 100% need to draw down that lump sum now? If not, there will undoubtedly be much more tax efficient ways to access that money over time.

To answer your question, do you already complete a self-assessment?

molerat

You don't need to do anything or tell anybody. It is of no concern to your payroll department what rate of tax you pay, they simply deduct tax according to the code issued to them by HMRC.  Both your employment and the pension are PAYE so HMRC will know what you have received and may adjust your employment tax code if necessary to reclaim any underpaid tax.  Unlikely you would need to submit SA. Does your on line tax account show the correct expected income from your employment ?

LHW99

You know if you take a taxable payment from the pension it triggers the MPAA (assuming this is DC and not a DB pension)?

DRS1

LHW99 said:

You know if you take a taxable payment from the pension it triggers the MPAA (assuming this is DC and not a DB pension)?

And I think you need to tell your employer/current pension scheme about that.

Like others I am wondering why you are doing this.  When I read the heading I thought you meant just the tax free lump sum not that you were taking the whole lot triggering a big tax charge.  If you can take just the tax free lump sum and nothing taxable then the MPAA would not apply.

Albermarle

Yes the MPAA, could well cause the OP and the employer some problems.
Still Rachel Reeves will be happy !