25% tax free before budget

Grumpy_chap

Aylesbury_Duck said:

flaneurs_lobster said:

I'd leave it 'till Tuesday, gives time for a few more rumours to circulate and ups the excitement levels (will they pick up the phone before COB?) 

I've put my house on the market today because some bloke at my pub told me that there's going to be a mansion tax.

Do you think it's feasible to exchange and complete in the next few days?

I can offer to buy your house at a value far lower than any "mansion tax" is rumoured to bite.  The value just fell because of the impending tax liability.  Sorry.
Perhaps you could use my generous offer as evidence to appeal against the mansion tax applying?

Albermarle

HappyHarry said:

4woods said:

With the budget looming and talk of Reeves changing the 25% tax free payment from pensions, question is if I call my pension providers Monday and ask for my 25% tax free lump sum, will that still be honoured if after the budget that % changes ?

Not sure how it will work, any advice, much appreciated 

thank you 

Ignoring the fact of whether this is a sensible thing to do or not, then you have probably left it too late anyway.

Most pensions are invested in funds, and your 25% would need to be held in cash before it could be withdrawn.

The settlement time for most uk funds is 4 days - or 2 days for ETFs and shares. 

Even if you did sell on Monday, and the cash was available on Wednesday, then it might not still get paid out until Thursday or later.

Due to the false panic stirred up in the media,(about something which was always unlikely to happen) , many providers have been overloaded with withdrawal requests and set deadlines.
My own SIPP provider said only applications for the tax free cash received before Nov 7th, would be processed before Nov 26th .
In the meantime it seems even more certain that there will be no announcements about tax free cash in the budget.

Grumpy_chap

Anyone who does withdraw funds ahead of a possible change to the rules in the Budget should be aware that the fund withdrawal cannot be simply reversed.

There was a thread on that topic not that long back relating to people who withdrew funds ahead of the last Budget and then there was no change so they sought to reverse the decision and fell foul of the rules (which had not changed).

For the vast majority of people, taking action on the basis of a rumour ahead of the Budget is not a course I would recommend.  There are a small number of people for whom this action ahead of the Budget might make good sense - the cohort I can think of are those that have the ability to access their funds now (i.e. of necessary age) and planned to withdraw the funds in the next few months with a clear purpose that had been part of their long term planning.  In this rather narrow set of circumstances, drawing the funds this week rather than, say, March 2026 might make logical sense.  I suspect anyone meeting that criteria will have thought about the potential Budget changes and made the decision to withdraw the funds rather a little while back.

Moonwolf

The rumours were about reducing the TFLS to £100k not entirely although have been mostly scotched so unless it is more than that, it certainly isn’t worth worrying.

If you have more than £1m in your pension and have reached the maximum £268,275 then there is an argument to crystallise it now because no one thinks the limit will rise any time soon and fiscal drag means that it will be worth less in real terms in a few years.

However, what will you do with it, once you have put £20k in an ISA and £50k in premium bonds you will have to take higher risks to avoid tax on the interest or be creative, make sure growth is capital gains or something else I haven’t looked at. Otherwise, if you are drawing down from a £1m plus pot you could have tax issues with the interest.

On the other hand, if you are in full state pension of £12k you could leave it there and take advantage of the tax free element to keep you below the HRT threshold as you draw down. You could flexibly draw down £48k a year of which £12k would be tax free, thus have a gross of £60k but only pay 20% tax on just under £36k of your income and still have the full £1000 tax free interest allowance and a bit of room to grow your drawdown in subsequent years.

Or, if you were worried about this change possibly happening in the future and your provider supports it, draw down as above and an £20k extra tax free each year to put in your ISA until it is used up.

It is almost certain for most people that a considered whole pension plan would have more tax advantageous than taking the full amount now, particularly based on rumours. Also if such a change happens, based on recent changes, it is quite likely that the change wouldn’t be instant and there would be some level of protection for those already old enough to draw down giving you time to make changes.

Play the ball as it lies.