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Early medical retirement- Help needed please to understand tax implications ...
dreamtimetk
Posts: 11 Forumite
Hello!
I'd welcome any advice on the following situation.
I'm trying to make the most of my finances (aren't we all !), but I'm not au fait with the rules relating to my benefits, income, tax etc.
In October 2007, at the age of 37, I had to take early retirement on medical grounds.
The background is that I currently receive:
- a pension at the rate of £433.30 gross per month
- Income Support at £83.80 per week
- Incapacity Benefit at £61.35 per week (short term basic)
- Disability Living Allowance at £109.50 per week (high rate care and mobility)
I was getting £145.15 per week Income Support, though this has just been reassessed down to £83.80 per week as I have just started receiving Incapacity Benefit at £61.35 per week- total the same as before.
It'd be a great help to know a few things...
Tax and Pension
I think that the social security benefits aren't classed as taxable income (the Incapacity Benefit is within the first 28 weeks of being paid).
The only income which is taxed is the pension at £433.30 per month (gross rather than net).
* As I worked until 19 October 2007, I am still liable to pay tax on the pension until April 2008 as, for the year, my total income will be over my tax allowance?
* After April 2008, with the new tax year, will I have to pay tax on the pension of £433.30 or will I receive it net (the yearly income from it will be within next year's tax allowance)? If not, how do I make sure my pension provider doesn't take off tax?
* How best can I make the most of my income (pension and benefits) in terms of paying tax?
Tax and savings
I think that I can have up to £16,000 in savings before it affects any social security payments.
* How can I make the most of my savings with regards paying tax? (e.g. not paying tax on interest from savings? are tax-free savings accounts any good for a non-tax payer etc.)
I greatly appreciated any advice or comments that anyone can give me.
Thank you.
dreamtimetk
I'd welcome any advice on the following situation.
I'm trying to make the most of my finances (aren't we all !), but I'm not au fait with the rules relating to my benefits, income, tax etc.
In October 2007, at the age of 37, I had to take early retirement on medical grounds.
The background is that I currently receive:
- a pension at the rate of £433.30 gross per month
- Income Support at £83.80 per week
- Incapacity Benefit at £61.35 per week (short term basic)
- Disability Living Allowance at £109.50 per week (high rate care and mobility)
I was getting £145.15 per week Income Support, though this has just been reassessed down to £83.80 per week as I have just started receiving Incapacity Benefit at £61.35 per week- total the same as before.
It'd be a great help to know a few things...
Tax and Pension
I think that the social security benefits aren't classed as taxable income (the Incapacity Benefit is within the first 28 weeks of being paid).
The only income which is taxed is the pension at £433.30 per month (gross rather than net).
* As I worked until 19 October 2007, I am still liable to pay tax on the pension until April 2008 as, for the year, my total income will be over my tax allowance?
* After April 2008, with the new tax year, will I have to pay tax on the pension of £433.30 or will I receive it net (the yearly income from it will be within next year's tax allowance)? If not, how do I make sure my pension provider doesn't take off tax?
* How best can I make the most of my income (pension and benefits) in terms of paying tax?
Tax and savings
I think that I can have up to £16,000 in savings before it affects any social security payments.
* How can I make the most of my savings with regards paying tax? (e.g. not paying tax on interest from savings? are tax-free savings accounts any good for a non-tax payer etc.)
I greatly appreciated any advice or comments that anyone can give me.
Thank you.
dreamtimetk
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