Tax Planning 25/26

eaustin

Hi, I recently retired. My salary/pension income for the year will be £51,020. My tax free income is £12,838.

I will earn interest from UK non-ISA accounts £1,500

I have also received £8,600 interest in an overseas account (Norway) which I assume will be informed to HMRC.

If I don't do anything I estimate, after £500 tax-free allowance, I will pay tax on £9,600.

I would like advice on some simple things I could do to reduce my tax liability. I understand I could give away up to £6,000 (including last year's unused allowance). I have also made gift aid donations of around £300.

I don't currently complete a self assessment so how would I inform HMRC of these donations to make sure I pay he correct amount of tax.

Any suggests welcomed.

Isthisforreal99

Suggest you speak to a tax advisor as you are tying yourself in knots.

Foreign interest is not notified to HMRC - you will probably need to register for Self Assessment.

The £3000/£6000 gift thing has nothing to do with income tax but is relevant for Inheritance Tax

How is your tax free income £12,838 when the personal allowance is £12,570.

eskbanker

https://forums.moneysavingexpert.com/discussion/6658154/tax-planning-25-26

You need to register for self-assessment if receiving more than £10K of savings interest.

In terms of actions to take to reduce tax liability, pension contributions are normally worth considering but if you're already in receipt of pension income then this may only be marginal if you've triggered MPAA. Is deferring pension payment viable or is it annuity-based?

NoMore

Do you have any salary from employment or is it all pension ?

You could contribute to a pension, net £2880 (which will become £3600 in the pension after basic tax relief) into a Pension without any income, more if you actually have employment income above £3600.

Given your figures, you would also be able to claim some Higher rate tax relief on this pension contribution. Not much but every little helps.

eaustin

https://forums.moneysavingexpert.com/discussion/comment/81910759#Comment_81910759

I maximised pension AVCs in the last 3 years so I don't think I can do anymore there. I am in receipt of a DB pension.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81910847#Comment_81910847

Do you mean 'maximised' in the sense of your workplace scheme not accepting any higher contributions, or actually reaching your annual HMRC tax relief limit? If the former, a SIPP could be the answer…

eaustin

https://forums.moneysavingexpert.com/discussion/comment/81910788#Comment_81910788

The income quoted was a mix of salary and pension, I retired at the end of December. I contributed £13,500 in AVCs in the tax year which was tax efficient, I don't think I can contribute to an additional/new pension. I received some lump sums on retirement which has increased the interest earned and I had accounted for the overseas account which is earning interest, after the sale of a family property, until transferred to the uk.

My annual income will drop in 25/26 to circa £40k excluding interest so this will be less of a problem next year.

eaustin

https://forums.moneysavingexpert.com/discussion/comment/81910729#Comment_81910729

Thanks for your reply and yes I misunderstood what I read about gifting, this is for IHT and irrelevant for my current situation.
With regards to the foreign interest my information states that this is shared under Common Reporting Standards. The overseas bank asked for my NINO so I am assuming it has been shared.
This year's allowance includes some prior year adjustments made by HMRC.

eskbanker

This year's allowance includes some prior year adjustments made by HMRC.

You're perhaps mixing up two different concepts there.

HMRC may adjust your tax code to tweak how much tax is collected via PAYE, but that doesn't actually change your tax liability for this year's income as such, it just modifies the in-year deductions, which are only ever provisional.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81910868#Comment_81910868

Suggest you seek appropriate tax advice to help with self assessment for this year.

If your overseas income source is to continue for the foreseeable future you will need to self assess in the coming years, accordingly.

Holding enough cash in Norway to generate interest in the year equivalent to £8600, might also suggest a tax adviser with cross border tax experience if your plan is to retain the cash in Norway going forward.

eaustin

https://forums.moneysavingexpert.com/discussion/comment/81910866#Comment_81910866

I was close to allowable contributions after using up prior year allowances. It's a complicated calculation. I thought there were some pension rules that prevented pension tax relief being reinvested into another pension. The AVCs were paid out as a cash lump sum and am taking my DB pension without any commutation.
If I can invest in a SIPP that would seem a good option. Would need to find out how long it would need to be invested.