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Trivial Pensions

mearnsfool
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Trivial Pensions

#398920

Postby mearnsfool » March 25th, 2021, 2:27 pm

Gentleman now retired and in receipt of his state and a good final salary pension living in Scotland. 41% tax starts at £43,430. He has £5,000 of his 21% tax band left before he pays 41% tax.

He is chased by his previous employer to do say 20 days a year work as he has an "in demand skill" and likes to use his brain for these small projects. He has registered a limited company and will earn between £8k to say at most £15k a year from this work via his limited company which is outside IR35. All the profit from the company is paid into a SIPP via his limited company contributions.

He wants to pay himself £5k taxable from his SIPP as a trivial pension so as not to hit the MPAA. We thought that he could crystalise £10,000 take 25% tax free and then a taxable £5,000 and leave the remaining £2,500 until the next tax year.

His provider has said he can as we are aware take benefit from three trivial pensions in his life time without invoking the MPAA but each trivial withdrawal is one of those three events. Therefore in this case in round figures he can only take out say £6,666, £1,666 tax free and £5,000 taxable pension payment ( so as not to pay 41% tax). Then do another trivial withdrawal. He cannot take a trivial benefit over a two tax year period, I can see the logic there!

Not really a big problem to have but has any one here been able to withdraw from a trivial pension over two tax years.

Yes, stretching it a bit!!!!!!!!!!

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