UFPLS and Starter Rate for Savings

trampie

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Dazed_and_C0nfused

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

trampie

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

Dazed_and_C0nfused

trampie said:

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

Well if you haven't applied for Marriage Allowance and your only non savings non dividend income is £12,570 then you will be able to earn £6,000 in interest without paying any tax for that year.

The first £5,000 would be taxed at 0% (savings starter rate band).

And the next £1,000 would also be taxed at 0% (the savings nil rate, aka Personal Savings Allowance).

The above assumes you don't earn enough interest (or dividends) to be a higher rate payer and you also don't make any Gift Aid donations.

trampie

Dazed_and_C0nfused said:

trampie said:

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

Well if you haven't applied for Marriage Allowance and your only non savings non dividend income is £12,570 then you will be able to earn £6,000 in interest without paying any tax for that year.

The first £5,000 would be taxed at 0% (savings starter rate band).

And the next £1,000 would also be taxed at 0% (the savings nil rate, aka Personal Savings Allowance).

The above assumes you don't earn enough interest (or dividends) to be a higher rate payer and you also don't make any Gift Aid donations.

Thank you for that information, I forgot about 5k plus the 1k (Personal Savings Allowance) .

Albermarle

trampie said:

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

What you say in bold has not changed, so is still valid. Three points though.
That assumes you have no employment income in the current tax year 25/26 ( so that you were made redundant in a previous tax year ) ?
That assumes your pension provider offers UFPLS payments ( most do ) 
Most likely that a UFPLS payment will get taxed and you will have to claim it back. Which month were you planning to take it ( also it can take a couple of weeks to come through)?

trampie

Albermarle said:

trampie said:

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

What you say in bold has not changed, so is still valid. Three points though.
That assumes you have no employment income in the current tax year 25/26 ( so that you were made redundant in a previous tax year ) ?
That assumes your pension provider offers UFPLS payments ( most do ) 
Most likely that a UFPLS payment will get taxed and you will have to claim it back. Which month were you planning to take it ( also it can take a couple of weeks to come through)?

Yes I was made redundant in the 24/25 tax year.
I'm now thinking of talking a small amount out in March (the end of this current tax year), say £500 as I understand I will then get a tax code/new tax code. Then I don't know whether to go for another £500 in April (the new financial year) and then go for £16,260 in May or just go for the full £16,760 in April.
The reason im not sure what to do is that I would like to avoid having a tax bill that I then have to then claim back, but I don't know if its possible for me to avoid that scenario?, I don't know what the best course of action would be for me to try and avoid a tax bill (and then have to go to the trouble of claiming it back).

NoMore

Use Flexi access drawdown instead of UFPLS, crystallise £16760, take the 25% tax free £4190, leaving £12570 in the drawdown account, take £1047.50 out of the drawdown every month from April.

If you need the whole lumpsum at once, then its hard not to pay some tax and have to claim it back, once you have the correct tax code, you could wait until the end of the FY to take the lumpsum and that should result in your cumulative code covering it all and no tax to pay, but that means waiting until march the following year to get it.

TBH claiming the tax back isn't difficult, personally I don't worry about it.

Albermarle

trampie said:

Albermarle said:

trampie said:

Dazed_and_C0nfused said:

trampie said:

Looking for some advice, i apologise if i have this totally wrong, i have recently been made redundant and intend to take money from my private pension for the first time sometime during the next financial year.
I intend to take my pension via UFPLS and understand that I could take £16,760 made up of £12,570 (which would be taxable but equates to my tax allowance) and £4,190 which would be the 25% tax free portion, so I hope to take £16,760 annually from my pension and pay no tax also as regards bank account savings i had previously had to pay tax on any interest i had earned over £1,000 but I am aware of something called 'starter rate for savings' where I'm lead to believe you can earn up to £5,000 in interest without incurring any tax in certain circumstances.
In my circumstance would I be able to take £16,760 out of my pension annually and also be able to earn up to £5,000 in bank interest and pay no tax at all ?

I don't know if I have some of the above wrong or even all of the above wrong or if i can actually do it.

Would this £16,760 definitely be split £12,570 (taxable) pension income and £4,190 TFLS?

Have you, or will you, be applying for Marriage Allowance to be in place for the 2026/27 tax year?

I haven't spoken to any professionals, I looked at a few articles about a year ago when I knew I was going to be made redundant and I thought that the first 75% of any withdrawal would be taxable and the last 25% tax free, I might be wrong in thinking that it was 12 months or so ago. I would ask my pension provider to split it £12,570 taxable/£4,190 tax free.

I haven't looked at the Marriage Allowance possibility yet, my wife does still work.

What you say in bold has not changed, so is still valid. Three points though.
That assumes you have no employment income in the current tax year 25/26 ( so that you were made redundant in a previous tax year ) ?
That assumes your pension provider offers UFPLS payments ( most do ) 
Most likely that a UFPLS payment will get taxed and you will have to claim it back. Which month were you planning to take it ( also it can take a couple of weeks to come through)?

Yes I was made redundant in the 24/25 tax year.
I'm now thinking of talking a small amount out in March (the end of this current tax year), say £500 as I understand I will then get a tax code/new tax code. Then I don't know whether to go for another £500 in April (the new financial year) and then go for £16,260 in May or just go for the full £16,760 in April.
The reason im not sure what to do is that I would like to avoid having a tax bill that I then have to then claim back, but I don't know if its possible for me to avoid that scenario?, I don't know what the best course of action would be for me to try and avoid a tax bill (and then have to go to the trouble of claiming it back).

If you do not claim the tax back, you will get it back automatically when your tax calculation is done by HMRC some months after the tax year ends ( although that is taking 8 to 10 months at the moment).