Is paying tax in retirement a bad thing?

[Dexydog]

DP

[Dexydog]

Thanks, yes Scottish Widows.
All about what I was thinking, thanks for confirming, so will see how things pan out.
Would you recommend pulling it all out over the 2 years, or leave it where it is and keep an eye on it?
Did get a bit spooked last year when the arse fell out of the markets, it dropped like a stone.

[Dexydog]

Quick question for Robert T- I am in whatever the pension is called which I joined in 2018, with AVC's I've been maxing out on there'll be 30k in there when I go which I intend to pull out as a lump sum in one go- would I be correct in saying if I take this as a lump sum at the start of the next tax year April 21/22 I will pay tax on 22500 (7.5k tax free), this will be refunded in the following tax year 22/23, provided I have no other income, as it will be within the total PTA for 21/22?

I assume you mean the RM Defined Contribution Plan with Scottish Widows?

If so, you can take all of it out in one go if you want to, with the first 25%(£7.5k) being tax free and the remainder being classed as income and taxed accordingly.

If you have no other earned income, the first £12,570 of that £22,500 will also be tax free, with the remainder being taxed at 20%.

In practice you might actually be taxed on all £22,500 initially, but if you have no other income these things tend to sorted out over time and you'll get a refund in due course.
Or you can get in touch with the tax office and either get the refund a lot quicker, or if you tell them beforehand, maybe not pay tax at all.
If
you want to avoid paying tax on it altogether, then you'll need to withdraw your money over 2 tax years instead of 1. Assuming no other income.

So if I took the circa 30k out over 2 years, what would be the best way to split this?- as in as I understand it you can only have the 25% tax free once, so would I be best to take 7.5k (the tax free 25%), plus another 12.5k one year, then the other 10k the next to keep below the PTA?

**apologies for my use of quotes I can never quite the hang of it!**

[RobertT]

So if I took the circa 30k out over 2 years, what would be the best way to split this?- as in as I understand it you can only have the 25% tax free once, so would I be best to take 7.5k (the tax free 25%), plus another 12.5k one year, then the other 10k the next to keep below the PTA?

Yes!

Assuming no other income:

Taking it all in one tax year would mean:

The first £7,500 is the tax free lump sum.
The next £12,570(the personal tax allowance) is also tax free.
The remaining £9,930 is taxed at 20%, leaving £7,944.

Taking it over 2 tax years:

Year 1 as per the £7,500 and £12,570 above.

Year 2 the £9,930 is tax free as it's below the PTA.
Meaning you can earn another £2,640 before you pay any tax.

So taking it over 2 tax years means £1,986 more in your pocket instead of the taxmans.

[Dexydog]

So if I took the circa 30k out over 2 years, what would be the best way to split this?- as in as I understand it you can only have the 25% tax free once, so would I be best to take 7.5k (the tax free 25%), plus another 12.5k one year, then the other 10k the next to keep below the PTA?

Yes!

Assuming no other income:

Taking it all in one tax year would mean:

The first £7,500 is the tax free lump sum.
The next £12,570(the personal tax allowance) is also tax free.
The remaining £9,930 is taxed at 20%, leaving £7,944.

Taking it over 2 tax years:

Year 1 as per the £7,500 and £12,570 above.

Year 2 the £9,930 is tax free as it's below the PTA.
Meaning you can earn another £2,640 before you pay any tax.

So taking it over 2 tax years means £1,986 more in your pocket instead of the taxmans.

Got it, I wasn't sure if you could take it in bits.
Thanks for your helpful advice, always very much appreciated.

[onejontwo]

So if I took the circa 30k out over 2 years, what would be the best way to split this?- as in as I understand it you can only have the 25% tax free once, so would I be best to take 7.5k (the tax free 25%), plus another 12.5k one year, then the other 10k the next to keep below the PTA?

Yes!

Assuming no other income:

Taking it all in one tax year would mean:

The first £7,500 is the tax free lump sum.
The next £12,570(the personal tax allowance) is also tax free.
The remaining £9,930 is taxed at 20%, leaving £7,944.

Taking it over 2 tax years:

Year 1 as per the £7,500 and £12,570 above.

Year 2 the £9,930 is tax free as it's below the PTA.
Meaning you can earn another £2,640 before you pay any tax.

So taking it over 2 tax years means £1,986 more in your pocket instead of the taxmans.

Got it, I wasn't sure if you could take it in bits.
Thanks for your helpful advice, always very much appreciated.

Wouldn't his weekly/monthly RM pension then put him over the £2640 limit?

[Dexydog]

So if I took the circa 30k out over 2 years, what would be the best way to split this?- as in as I understand it you can only have the 25% tax free once, so would I be best to take 7.5k (the tax free 25%), plus another 12.5k one year, then the other 10k the next to keep below the PTA?

Yes!

Assuming no other income:

Taking it all in one tax year would mean:

The first £7,500 is the tax free lump sum.
The next £12,570(the personal tax allowance) is also tax free.
The remaining £9,930 is taxed at 20%, leaving £7,944.

Taking it over 2 tax years:

Year 1 as per the £7,500 and £12,570 above.

Year 2 the £9,930 is tax free as it's below the PTA.
Meaning you can earn another £2,640 before you pay any tax.

So taking it over 2 tax years means £1,986 more in your pocket instead of the taxmans.

Got it, I wasn't sure if you could take it in bits.
Thanks for your helpful advice, always very much appreciated.

Wouldn't his weekly/monthly RM pension then put him over the £2640 limit?

Not applicable, I won't have a monthly pension.