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Private pension calculation.
My relative has just retired, he will be 72 in May and pays 20% tax.. He has a small private pension which he has decided to take, showing a current valuation.£15545.00. The figures they have given are £3886.25 (tax free) leaving £11658.75 (75% to be taxed). They then show a figure of £3624.75 as tax to pay. Can anyone confirm that this figure is correct please as we are in unfamiliar territory here!
Comments
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The figures sound correct for emergency tax. Any exceess tax can be claimed back via Government Gateway (or the paper method)
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
How much tax will be deducted and how much tax is ultimately due are two entirely separate things. If there is no code currently allocated the provider will use 1257LM1 as they are required to by the tax rules and the amount indicated would be deducted. If he remains a basic rate tax payer with this pension amount added to his other income then around £2331 tax is due so he would need to reclaim the excess.
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Thank you to both of you for the useful info. Am I correct in assuming, once payment has reached his bank account, is it, at this point we can apply for the refund or do we have to wait for the new tax year commencing.
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Also it depends on what his earnings are so far this year. Even if he was paying 20% tax in his job, it is possible the £11658 would be enough to push him into the 40% bracket.
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You don't actually have to claim anything, HMRC will automatically review things once the tax year has ended and refund any overpaid tax.
https://www.gov.uk/tax-overpayments-and-underpayments
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You make a very good point. I really have.no idea the exact amount he earns, hopefully it won't be circa £38.000. It's too late now, but would.he have been better off leaving his.pension til the new tax year.
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Presume at 72, he is getting his state pension, which is also taxable income.
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