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  • FIRST POST
    • dave hendy
    • By dave hendy 9th Nov 19, 9:21 AM
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    dave hendy
    Very basic pension tax question?
    • #1
    • 9th Nov 19, 9:21 AM
    Very basic pension tax question? 9th Nov 19 at 9:21 AM
    This is a very basic question for most on this forum I guess, but I am afraid I don't understand it!


    When my wife gives up work early at about 52, she will have several small pensions with pots from 100 to 12K up to a value under 50k. If she takes some of them in cash for example 8K in one tax year, I understand she will get 2k without paying tax and will be taxed at 20% on the other 6k. If she then has a small savings interest but total with the 6k under her personal allowance, will she get the tax paid back on the 6k?


    Thanks for any information on this
Page 1
    • Dazed and confused
    • By Dazed and confused 9th Nov 19, 9:35 AM
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    Dazed and confused
    • #2
    • 9th Nov 19, 9:35 AM
    • #2
    • 9th Nov 19, 9:35 AM
    Yes but she shouldn't be taxed at 20% on the 6k, it will be more than that.

    The emergency tax code will be used on the first payment which will mean there will be a mix of no tax (first 1,042), 20% tax (next 3,125) and 40% (final 1,833).

    If her total taxable income is less than 11,250* (current tax year value) then she would get any tax paid back. Either when she claims it from HMRC or a bit later if she waits for them to review her details after the end of the tax year.

    *this assumes she has applied for Marriage Allowance.
    • Albermarle
    • By Albermarle 9th Nov 19, 9:35 AM
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    Albermarle
    • #3
    • 9th Nov 19, 9:35 AM
    • #3
    • 9th Nov 19, 9:35 AM
    Yes she will get the tax refunded . Form P55 I think .
    She may find that more tax is deducted than expected as one off payments are taxed under an emergency code but it will still all get refunded.
    The savings interest is not counted anyway as long as it is under 1000.
    • Dazed and confused
    • By Dazed and confused 9th Nov 19, 9:37 AM
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    Dazed and confused
    • #4
    • 9th Nov 19, 9:37 AM
    • #4
    • 9th Nov 19, 9:37 AM
    The savings interest is not counted anyway as long as it is under 1000.
    Savings interest will be counted. There is no separate allowance for this and you need to have total taxable income of at least 16,251 before you can make use of the 1,000 savings nil rate band (commonly known as the Personal Savings Allowance).
    • dave hendy
    • By dave hendy 9th Nov 19, 9:49 AM
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    dave hendy
    • #5
    • 9th Nov 19, 9:49 AM
    • #5
    • 9th Nov 19, 9:49 AM
    Okay, that's good to know. She will probably take all her pensions out over a few years as they are so small it's not worth having them.


    She will pay interest on her savings as she gets over the 1k interest until she uses enough capital off.


    Thanks for clearing this up, I am just starting to get my head around pensions as we are both thinking of giving up work in a year or so. I have never understood pensions so have always just let them do what was set up by my companies. I do have an Equitable Life pension as well which is another cause for concern. Luckily we do have some savings which will be our main source of income in retirement.
    • Dazed and confused
    • By Dazed and confused 9th Nov 19, 9:50 AM
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    Dazed and confused
    • #6
    • 9th Nov 19, 9:50 AM
    • #6
    • 9th Nov 19, 9:50 AM
    She will pay interest on her savings as she gets over the 1k interest until she uses enough capital off.
    Wouldn't she be better off finding an account that pays her interest?
    • dave hendy
    • By dave hendy 9th Nov 19, 10:09 AM
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    dave hendy
    • #7
    • 9th Nov 19, 10:09 AM
    • #7
    • 9th Nov 19, 10:09 AM
    Sorry I meant she will pay tax as she gets over the 1k of savings interest.
    • Dazed and confused
    • By Dazed and confused 9th Nov 19, 10:28 AM
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    Dazed and confused
    • #8
    • 9th Nov 19, 10:28 AM
    • #8
    • 9th Nov 19, 10:28 AM
    You've thoroughly confused me now!

    You only pay tax on savings interest if your taxable income is over 16,250 (17,250 for some).

    In your first post you said

    If she then has a small savings interest but total with the 6k under her personal allowance,
    So what additional income does she have which means she will use up her all of her

    1. Personal Allowance (11,250 or 12,500)
    2. Savings starter rate of tax (upto 5,000 taxed at 0%)
    3. Savings nil rate of tax (upto 1,000 taxed at 0%)
    Last edited by Dazed and confused; 09-11-2019 at 10:37 AM.
    • Nebulous2
    • By Nebulous2 9th Nov 19, 11:34 AM
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    Nebulous2
    • #9
    • 9th Nov 19, 11:34 AM
    • #9
    • 9th Nov 19, 11:34 AM
    Except for some very special circumstances she wont be able to access her pensions until she is 55.
    • dave hendy
    • By dave hendy 9th Nov 19, 11:52 AM
    • 29 Posts
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    dave hendy
    Except for some very special circumstances she wont be able to access her pensions until she is 55.
    Originally posted by Nebulous2

    That's fine, she won't do it until she is 55. Just trying to get my head around things before we do anything.
    • dave hendy
    • By dave hendy 9th Nov 19, 11:58 AM
    • 29 Posts
    • 4 Thanks
    dave hendy
    You've thoroughly confused me now!

    You only pay tax on savings interest if your taxable income is over 16,250 (17,250 for some).

    In your first post you said



    So what additional income does she have which means she will use up her all of her

    1. Personal Allowance (11,250 or 12,500)
    2. Savings starter rate of tax (upto 5,000 taxed at 0%)
    3. Savings nil rate of tax (upto 1,000 taxed at 0%)
    Originally posted by Dazed and confused

    At the moment she pays extra tax on her savings interest (just had a letter from the taxman for 200 in unpaid tax on savings). So I took it she will still be paying tax on this after she finishes work, but I see now she won't, if she is careful how much she takes each year from these pensions she can keep it below her allowance.
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