collecting a pension pot within your income tax allowance
Posted: April 26th, 2024, 5:28 pm
Married female wanting to take some of her pension pot. No earnings and had transferred her married persons allowance and is a normal rate tax payer.
So I assume £12500 - £1260 = £11240 tax allowance remaining. Also has some untaxed savings interest which I assume could be covered by either £1k savings allowance and or £5k extra additional savings allowance with no earnings. I have asked her to guestimate this and off the top of her head said about £1k
So should be able to take £11240 out of the pot without paying tax.
The question is, Is tax taken from the pot on collection. If so I assume you claim it back from the tax man. I think I found a P55 form. Alternatively is there a way of getting the whole amount out with out being taxed. Ie some sort of declaration of unused tax allowance.
Apparently there are several options
1. Take my tax-free cash up front - also known as flexi-access drawdown.
2. Spread my tax-free cash over all withdrawals - also known as Uncrystallised Funds Pension Lump Sums(UFPLS)
3. Take my pension as a taxable lump sum - also known as Uncrystallised Funds Pension Lump Sums (UFPLS)
I think they were looking at 3 only because they have the unused tax allowance. I think they have several small pots this particular one being in the £11-12k range. So just under or just over the threshold.
I suspect even if they used option 1 they might get more up front cash but still be left with claiming tax back.
Thanks for any replies or incites on how it works in practice
So I assume £12500 - £1260 = £11240 tax allowance remaining. Also has some untaxed savings interest which I assume could be covered by either £1k savings allowance and or £5k extra additional savings allowance with no earnings. I have asked her to guestimate this and off the top of her head said about £1k
So should be able to take £11240 out of the pot without paying tax.
The question is, Is tax taken from the pot on collection. If so I assume you claim it back from the tax man. I think I found a P55 form. Alternatively is there a way of getting the whole amount out with out being taxed. Ie some sort of declaration of unused tax allowance.
Apparently there are several options
1. Take my tax-free cash up front - also known as flexi-access drawdown.
2. Spread my tax-free cash over all withdrawals - also known as Uncrystallised Funds Pension Lump Sums(UFPLS)
3. Take my pension as a taxable lump sum - also known as Uncrystallised Funds Pension Lump Sums (UFPLS)
I think they were looking at 3 only because they have the unused tax allowance. I think they have several small pots this particular one being in the £11-12k range. So just under or just over the threshold.
I suspect even if they used option 1 they might get more up front cash but still be left with claiming tax back.
Thanks for any replies or incites on how it works in practice