TFLS and recycling query.
BJL55
Posts: 34
Forumite
I’m hoping to retire at the end of June this year with a CETV transfer in to drawdown, by then I will have earned circa £16K taxed at 40% with no pension (personal or company) contributions.
For the rest of 2018/19 I would have no more earnings, I would be taking a TFLS (maybe not the full 25% in the first year) so I would expect I could claim a tax refund at the end of the tax year, or can I claim it earlier?
Would it also be possible to recycle up to £16k back in to the drawdown account and claim another 20% by way of tax relief without invoking the MPAA of £4000, or will I be limited to £3600?
I don’t plan to take withdrawals above the 25% TFLS limit till 2021.
For the rest of 2018/19 I would have no more earnings, I would be taking a TFLS (maybe not the full 25% in the first year) so I would expect I could claim a tax refund at the end of the tax year, or can I claim it earlier?
Would it also be possible to recycle up to £16k back in to the drawdown account and claim another 20% by way of tax relief without invoking the MPAA of £4000, or will I be limited to £3600?
I don’t plan to take withdrawals above the 25% TFLS limit till 2021.
0
Comments
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The MPAA reduction and recycling are two different matters. MPAA is only invoked if you take taxable money from a DC pension. Recycling controls relate to paying the TFLS into a pension.
There are detailed flowcharts on various pension company advisor websites that show HMRCs decision process for saying that recycling has occurred Try googling pension recycling.There doesnt seem to be a definitive statement aimed at the general public.0 -
by then I will have earned circa £16K taxed at 40%
Why not simply contribute to it from income in April, May and June?
Information here about triggering MPAA
https://www.moneymarketing.co.uk/what-triggers-the-mpaa/
and here about recycling
http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0621
The IFA handling your DB pension transfer should be able to give you personal advice concerning all the above.0 -
Many thanks for the replies.
I've reviewed the link above but found it a bit vague, however there is a flow chart on the Royal London site that lays it out somewhat better:
https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
Pretty sure I would answer "Yes" to all the conditions although I could possibly answer "No" to condition 4. As suggested I'll have to run it by my IFA to be absolutely sure.0
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