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  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 3rd Jan 17, 8:39 AM
    • 499Posts
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    nxdmsandkaskdjaqd
    Paying 2880 into pension when retired
    • #1
    • 3rd Jan 17, 8:39 AM
    Paying 2880 into pension when retired 3rd Jan 17 at 8:39 AM
    Jamesd wrote in another thread the following:
    "She can make 720 a year tax free by paying 2880 net into a pension, having it grossed up to 3600 then withdrawing it. Can only do the withdrawing part from age 55. Can only pay in for this until age 75."

    I have just retired at 60 and have transferred my DC pension to a new SIPP. I plan to live off savings till state pension kicks in.

    I am correct that the above approach should be part of my strategy of being tax efficient?
    Last edited by nxdmsandkaskdjaqd; 03-01-2017 at 10:14 AM.
Page 28
    • Dazed and confused
    • By Dazed and confused 12th Feb 18, 9:16 PM
    • 2,485 Posts
    • 1,186 Thanks
    Dazed and confused
    Dorian1958

    Assuming you are referring to a personal pension or SIPP then it should be declared on the self assessment return but it will not make any difference to the self assessment tax bill.

    The basic rate tax relief of 720 would still be claimed by the pension company and added to the pension fund but there is no personal tax savings in this situation.
    • Dorian1958
    • By Dorian1958 14th Feb 18, 7:03 PM
    • 136 Posts
    • 98 Thanks
    Dorian1958
    Thanks Dazed, thought it might be too good to be true.
    • Dazed and confused
    • By Dazed and confused 14th Feb 18, 7:13 PM
    • 2,485 Posts
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    Dazed and confused
    You would still be getting a pension pot of 3,600 for a payment of 2880 so not all bad!
  • jamesd
    Thanks Dazed, thought it might be too good to be true.
    Originally posted by Dorian1958
    Unfortunately you've been incorrectly told that there is no benefit for you when there is a 180 benefit.

    When you take the pension money, 25% is normally tax free, won't be taxed by the pension firm and doesn't need to be declared to HMRC. So you get one quarter of the 720 as your tax gain.
    • Dorian1958
    • By Dorian1958 16th Feb 18, 1:47 PM
    • 136 Posts
    • 98 Thanks
    Dorian1958
    Thanks jamesd, it all helps!
    • Mothman
    • By Mothman 20th Feb 18, 12:57 PM
    • 88 Posts
    • 22 Thanks
    Mothman
    Have just transferred my wifes small stakeholder pension of 11.5K to HL for drawdown.

    As she has an unused personal allowance for 2017/18, if she was to crystalize 10k and withdraw it in March does anyone know if the emergency tax code would mean that she would be taxed on 7.5K which she would then have to reclaim, or would all 10K be received tax free as it been taken in the last month on the tax year?
    • Dazed and confused
    • By Dazed and confused 20th Feb 18, 1:34 PM
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    • 1,186 Thanks
    Dazed and confused
    The emergency code would almost certainly be used for the first payment but she doesn't have to reclaim it, HMRC will refund it automatically as part of their process of reviewing things after the tax year end.

    If her total taxable income is low enough she may also be able to apply for Marriage Allowance for 2017:18, no benefit to her but could potentially save you 230!
    • Mothman
    • By Mothman 20th Feb 18, 1:50 PM
    • 88 Posts
    • 22 Thanks
    Mothman
    Thanks for the reply and good news that any refund would be done automatically. Have not been able to claim the Marriage Allowance prevously but looks like I may just sneak under the threshold this tax year.
    • Dazed and confused
    • By Dazed and confused 20th Feb 18, 1:53 PM
    • 2,485 Posts
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    Dazed and confused
    Marriage Allowance doesn't have an income threshold. All that matters (from your perspective) is that you aren't a higher rate payer.

    You could easily have income of say 50k but with pension contributions not be a higher rate payer.
    • caveman38
    • By caveman38 20th Feb 18, 1:54 PM
    • 913 Posts
    • 291 Thanks
    caveman38
    The emergency code would almost certainly be used for the first payment but she doesn't have to reclaim it, HMRC will refund it automatically as part of their process of reviewing things after the tax year end.

    If her total taxable income is low enough she may also be able to apply for Marriage Allowance for 2017:18, no benefit to her but could potentially save you 230!
    Originally posted by Dazed and confused

    Useful information D&C re. Marriage Allowance. Can you increase allowance only be used to save tax at the standard rate then?
    • Dazed and confused
    • By Dazed and confused 20th Feb 18, 2:00 PM
    • 2,485 Posts
    • 1,186 Thanks
    Dazed and confused
    Getting Marriage Allowance does not entitle you to any additional allowances at all.

    The person applying is effectively agreeing to a reduction in their personal allowance in order that you get a fixed amount knocked of your tax bill as a result, 230 (if youre due to pay that much tax) this tax year and 238 next year.
    • Mothman
    • By Mothman 20th Feb 18, 3:44 PM
    • 88 Posts
    • 22 Thanks
    Mothman
    Marriage Allowance doesn't have an income threshold. All that matters (from your perspective) is that you aren't a higher rate payer.

    You could easily have income of say 50k but with pension contributions not be a higher rate payer.
    Originally posted by Dazed and confused
    Oh bother! I searched for this some while ago on the GOV website but had obviously missed that pension contributions were offsetable and so did not claim.
    • Dazed and confused
    • By Dazed and confused 21st Feb 18, 6:00 AM
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    Dazed and confused
    I presume you mean you didn't ask your wife to make an application :-)

    It's still not too late for her to apply right back to 2015:16 but before doing so it might be worth investing 10 minutes into checking her taxable income each year and if you definitely were just a basic rate payer in each tax year.
    • Mothman
    • By Mothman 21st Feb 18, 8:27 AM
    • 88 Posts
    • 22 Thanks
    Mothman
    I presume you mean you didn't ask your wife to make an application :-)

    It's still not too late for her to apply right back to 2015:16 but before doing so it might be worth investing 10 minutes into checking her taxable income each year and if you definitely were just a basic rate payer in each tax year.
    Originally posted by Dazed and confused
    Yes sorry that is what I meant, though in practice it is left to me to do all the form filling.

    Wife has had no income since 2015 other than a few small dividend payments as her SP is currently deferred. I have been making large pension contributions for the last 3 tax years and so if these are offsetable then my income will have been comfortably within the basic rate band. I have found the form for claiming 2016/17 and will ask my wife to call about making a claim for 2015/16.

    Thanks again for the help
    • enthusiasticsaver
    • By enthusiasticsaver 21st Feb 18, 10:37 AM
    • 6,267 Posts
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    enthusiasticsaver
    Yes sorry that is what I meant, though in practice it is left to me to do all the form filling.

    Wife has had no income since 2015 other than a few small dividend payments as her SP is currently deferred. I have been making large pension contributions for the last 3 tax years and so if these are offsetable then my income will have been comfortably within the basic rate band. I have found the form for claiming 2016/17 and will ask my wife to call about making a claim for 2015/16.

    Thanks again for the help
    Originally posted by Mothman
    She can do it online on the gov.uk site. Took me 10 minutes last week to transfer mine to my DHs. To be honest though when you go through the online eligibility checker I do not remember anything about pension contributions being offsetable. My DH is now retired though and does not pay HR tax or pension contributions so perhaps I missed it.
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    • Dazed and confused
    • By Dazed and confused 21st Feb 18, 1:15 PM
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    Dazed and confused
    It might not mention it but on the Cutting Tax board there have been extensive threads and one very knowledgeable poster called Polymaff posted a link to the actual tax law.

    No mention of income (or offsetting pension contributions), the rules are are simply based on what rate of tax you pay and higher rate payers cannot benefit.
    • Oddjob
    • By Oddjob 23rd Feb 18, 6:12 AM
    • 432 Posts
    • 130 Thanks
    Oddjob
    I had though that I understood this but I think I have got myself confused again. Please could someone advise me, I would be most grateful.

    I have lived for many years on a low income. Therefore I don't have much in savings, except for a small amount that is left from a small company pension which I needed to take last year - only took the 25% tfls, the rest is paid monthly.
    I am semi retired, I had deferred my state pension but decided to take that last year too. I am a 65yo woman.
    I don't earn a great deal but with the two pensions, this year I will have received just above my personal allowance so will be paying a small amount of tax I think, not worked it out but it won't be much above.
    I am interested in this thing where I could put 2880 into a HL SIPP account and get some tax relief.
    I also get WTC and PIP.
    If I put the 2880 into a HL account, once the tax relief has gone in, would I be able to draw most of it out as a lump sum, or would I have to leave 1000 in? I know you can't draw all of it out as HL would charge fees, don't they charge fees for the account anyway?
    Next year, my work is being cut by around 40% so I won't be paying tax next year.
    If I paid the 2880 in before April 6th, 2017-2018 tax year, in a tax year that I would be paying tax, but didn't take it out until a few months into 2018 - 2019 tax year, would I still get charged tax on it if I drew most of it out, less of course the 25% tfls?
    If I paid the lump sum in to the SIPP, would that lessen my available earnings, therefore increase my WTC?
    Would it also count as lessening my earnings as far as self assessment was concerned, therefore making it less likely that I would have to pay tax anyway?
    I know it has to be a HL cash SIPP.

    I don't want to tie my money up because as I say, I don't have much spare in the bank and might need it for a change of car at some point. Just wanting hopefully to increase it a bit.
    Is it limited to paying in 2880, would there be any advantage to paying in more?
    If it was left in HL, would it be earning interest or would I be better to draw it out and put it into something which I could still get it out of but would earn interest? At the moment it is just in a current account which is not paying interest.

    Also, HMRC owes me 2200 + interest on overpaid tax from years ago, I left it in in case I ever did need to pay tax, so I presume if I did need to pay tax this year, they would take it out of that anyway. Does anyone know how much interest that is earning?

    Sorry for all the questions. Thanks for reading this far!!!
    • Mnd
    • By Mnd 23rd Feb 18, 7:52 AM
    • 479 Posts
    • 547 Thanks
    Mnd
    I will answer a few points as I understand them

    Yes you can pay in this tax year and take when you like, if your liable for tax on this money then the gain will be about 180 but you can wait to get the full benefit if you don't exceed your tax allowance
    I understand that you will pay tax anyway and either claim back or wait until they refund you
    If you don't earn anything then you are limited to the 2880
    Hl don't charge if you hold the pot as cash but insignificant interest
    I'm not sure about the 1000 but I will be finding out soon, as I intend to clear mine and start again in April
    Get your money back from hmrc pronto..that's nearly this year's payment
    Hope this helps
    Last edited by Mnd; 23-02-2018 at 7:53 AM. Reason: Auto correct is a pain!
    • Oddjob
    • By Oddjob 23rd Feb 18, 11:49 AM
    • 432 Posts
    • 130 Thanks
    Oddjob
    I will answer a few points as I understand them
    ..........Get your money back from hmrc pronto..that's nearly this year's payment
    Hope this helps
    Originally posted by Mnd
    I would rather they kept it as it is at least earning interest, just not sure how much. It was 3,300 but I had to draw some last year.
    I keep it there as rainy day money.

    thanks.
    • skycatcher
    • By skycatcher 6th Mar 18, 5:00 PM
    • 16 Posts
    • 4 Thanks
    skycatcher
    Just a final sanity check on my understanding
    HI,

    Just completing the paper work to move into drawdown. Am I correct in thinking that moving money from SIPP to drawdown in itself does not have tax implications but only when withdrawals are made?

    So I could move 2880 (haven't received the tax money yet!) into drawdown and take 720 TFLS and say 10 a month thereby avoiding any tax as the rest is still sitting in the drawdown account i.e. 2880 - 720 = 2160 then 2160 - 10 ongoing.

    Or does the fact of moving 2660 into drawdown even if not taking the money out has a tax implication?

    Thanks,

    Sky
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