Can you take 20% tax free + pay in to grow tax free pot for later?

Cash_Cow

I'm just confused as my SSAS will CONTINUE to take monthly rental payments in after the planned crystalisation that is to enable me to take the 25% PCLS but then also then take that rental money out monthly as an income. I understand that income part will be PAYE taxable.

BUT

Is there a better way that will allow me to get 25% tax deduction on the future incoming monthly rent payments or is that just impossible after crystalisation?

How about if I take 20% PCLS - will that then let the pot grow tax free and give me 25% tax off drawings from the growing pot going forward?

I have asked IFA of course, but as ever devil is in the detail so have asked hm again.

Thanks for any clarity meantime.

HappyHarry

You have a pension plan containing an asset that produces an income. It matters not if that income is from rental income, dividends or interest.

You can take 25% of the current value of your pension plan (up to a limit) as tax-free cash. This would crystallise the entire pension. Any further withdrawals you make from the pension will be taxable.

If you took 20% tax-free cash now then you would crystallise 80% of your pension. You would then have a large crystallised portion of your pension, and a smaller uncrystallised portion. This would mean that you could still take 25% tax-free cash from the uncrystallised portion of your pension. However, any withdrawals from the crystallised portion would be liable to income tax.

Income generated from an asset owned by the pension does not change the above at all.

However, if you or your business made pension contributions in future, then those contributions would increase the value of the uncrystallised pot, allowing to to take further 25% tax-free cash (again, upper limits apply).

Cash_Cow

Thanks Harry. Very appreciated.

I guess what I don't get my head around is that the monthly rental income in post crystalisation is NEW MONEY. Nothing to do with the crystallisation at that point. The income is made AFTER that.

But that doesn't matter right as its still the same part of the property element of the SSAS. But company contributions are treated differently and can be 25% tax free on drawdown. Thats what i struggle with - why? Its all new money!

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81917415#Comment_81917415

Income from an existing asset is NOT new money. A new contribution from you or the company would be new money.

HappyHarry

https://forums.moneysavingexpert.com/discussion/comment/81917415#Comment_81917415

No, unfortunately the rental income is not "new money".

The pension owns a property which is let out to a business. The business renting the property pays rent, but this is not a pension contribution.

Cash_Cow

THAT is the missing link in my logic as I've always thought about the rent being a pension contribution. Seems logical to me - err it being paid into a pension wrapper and all. Max PCLS it is then. Cheers

Thank you so much Harry

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81917449#Comment_81917449

Its the same across all assets. Once the asset is inside the tax wrapper (pension, ISA, Investment bond, etc.), then anything it generates stays inside the wrapper.

Shares pay a dividend - that is not new money

Deposits pay interest - that is not new money

Property pays rental income - that is not new money.

This is where the phrase "tax wrapper" comes from. Once an asset (shares, cash, property) is inside the wrapper (a pension, ISA, bond, etc.), the wrapper “owns” it and anything it produces.