Best time of year to leave.

[Hawkey99]

Deferring retirement until after April ???

Just read that on another topic and it got me thinking.

What effect would it have on anything if you either took your pension before or after 1st April ?

Which is a better time to leave ?

Also and more importantly is there a best month or time to leave from a financial perspective ?

Thanks

[Hawkey99]

Anybody got any thoughts or knowledge ??

[arnold cheshire]

Anybody got any thoughts or knowledge ??

Annual leave owing birthday etc looks impossible to say

[baldrick]

The later you leave after the start of the tax year the more you will have earned in pay. Together with your lump sum and pension (and pay if you take another job) this might take you into the higher tax level and that would mean you would be paying 40% tax (I think that is the higher tax level now) over any amount over the higher tax threshold - I don't know how much that is now, but it was around £43k when I retired. But you should get a tax rebate in the following tax year.
I retired in June 2013, and took a temp Xmas job that year. I was paying 40% tax on my pension iirc and on the pay from my temp job which was at just minimum wage. I did get a tax rebate of about £5k the following year.

Apart from the tax implication I thought June was a good time to leave as it meant I could enjoy the Summer which was a good one in 2013, though if I had stayed until September I would have got the employee shares.

[heapsy]

The later you leave after the start of the tax year the more you will have earned in pay. Together with your lump sum and pension (and pay if you take another job) this might take you into the higher tax level and that would mean you would be paying 40% tax (I think that is the higher tax level now) over any amount over the higher tax threshold - I don't know how much that is now, but it was around £43k when I retired. But you should get a tax rebate in the following tax year.
I retired in June 2013, and took a temp Xmas job that year. I was paying 40% tax on my pension iirc and on the pay from my temp job which was at just minimum wage. I did get a tax rebate of about £5k the following year.

Apart from the tax implication I thought June was a good time to leave as it meant I could enjoy the Summer which was a good one in 2013, though if I had stayed until September I would have got the employee shares.

Great post. Gives a good all round account of the issue. My birthday falls in mid August, so intend to go the last working day before my 60th birthday. Hopefully the pay deal for that year will be settled by then. I will be able to enjoy what remains of the summer that year, enjoying the sun rise and not be thinking about the "W" word. The tax situation is important, so people shouldn't jump in and take everything, NRA60, 65 etc without working out the pros and cons. I will leave my NRA65 until the correct age, and live hopefully tax free, or paying minimal amounts at most, due to other savings / investments I am making. (check my posts for clues or contact me directly by all means).

[RobertT]

The later you leave after the start of the tax year the more you will have earned in pay. Together with your lump sum and pension (and pay if you take another job) this might take you into the higher tax level and that would mean you would be paying 40% tax (I think that is the higher tax level now) over any amount over the higher tax threshold - I don't know how much that is now, but it was around £43k when I retired. But you should get a tax rebate in the following tax year.
I retired in June 2013, and took a temp Xmas job that year. I was paying 40% tax on my pension iirc and on the pay from my temp job which was at just minimum wage. I did get a tax rebate of about £5k the following year.

Apart from the tax implication I thought June was a good time to leave as it meant I could enjoy the Summer which was a good one in 2013, though if I had stayed until September I would have got the employee shares.

Pension Commencement Lump Sums are tax free, so don't count towards your taxable income.

It sounds to me as if you were on an emergency tax code and therefore paid 40% tax on both pension and job. A new financial year usually sorts everything out, unless you tell HMRC beforehand.

The 40% tax band currently applies to earnings over £46,350.

[Fatboyslim]

Depends on anytime of the year - if you decide to carry on working (hopefully not). Your salary and pension will be all added together.

I left in a January. Contacted HMRC. Informed them of my not/no intention of returning to work. I received a tax refund within approximately 6-8 weeks. As I'd spectacularly entered the 40% tax bracket with wages and VR payments. HMRC were true to their word.

Just do not claim your pension whilst you are in work. I cannot see the point in this, you are paying 32% tax and NI on it.

[RobertT]

Just do not claim your pension whilst you are in work. I cannot see the point in this, you are paying 32% tax and NI on it.

I agree that taking your pension before NRA and continuing to work is barmy as you're being hit with a double whammy of early payment reductions and income tax.
But going by these forums there still seems to be plenty of people doing it and on the face of it, not really looking into the consequences until afterwards, which is equally barmy!

Btw, you don't pay NIC's on pension income!

[arnold cheshire]

The later you leave after the start of the tax year the more you will have earned in pay. Together with your lump sum and pension (and pay if you take another job) this might take you into the higher tax level and that would mean you would be paying 40% tax (I think that is the higher tax level now) over any amount over the higher tax threshold - I don't know how much that is now, but it was around £43k when I retired. But you should get a tax rebate in the following tax year.
I retired in June 2013, and took a temp Xmas job that year. I was paying 40% tax on my pension iirc and on the pay from my temp job which was at just minimum wage. I did get a tax rebate of about £5k the following year.

Apart from the tax implication I thought June was a good time to leave as it meant I could enjoy the Summer which was a good one in 2013, though if I had stayed until September I would have got the employee shares.

Great post. Gives a good all round account of the issue. My birthday falls in mid August, so intend to go the last working day before my 60th birthday. Hopefully the pay deal for that year will be settled by then. I will be able to enjoy what remains of the summer that year, enjoying the sun rise and not be thinking about the "W" word. The tax situation is important, so people shouldn't jump in and take everything, NRA60, 65 etc without working out the pros and cons. I will leave my NRA65 until the correct age, and live hopefully tax free, or paying minimal amounts at most, due to other savings / investments I am making. (check my posts for clues or contact me directly by all means).

retire one day after your 60 to get shares etc

[baldrick]

Pension Commencement Lump Sums are tax free, so don't count towards your taxable income.

It sounds to me as if you were on an emergency tax code and therefore paid 40% tax on both pension and job. A new financial year usually sorts everything out, unless you tell HMRC beforehand.

I was already on the higher tax rate as I had taken my pension at 60 - but I didn't pay tax on my pension lump sum then.
The lump sum payment in June 2013 was VR payment on which you pay tax on over £30k iirc. And it was included in my total pay for the year, as shown on my P60.
I didn't know anything about tax, I assumed when I started the temp Xmas job that the employer would sort all that with HMRC, but you are right they probably just put me on emergency code based on my being on higher tax rate when I left RM.

[baldrick]

Just do not claim your pension whilst you are in work. I cannot see the point in this, you are paying 32% tax and NI on it.

I took my pension at 60 and continued working until I took VR at 62. You don't pay NI after 60 and you only pay the higher tax rate on the amount over the Higher Tax threshhold limit, which I think was £41k at the time. I was only paying the higher tax rate on a few hundred pounds. But not claiming my pension would have cost me thousands of pounds.
But I couldn't understand why people were doing overtime when they were in the higher tax bracket and paying 40% tax on it.

[neilgg]

You don't pay NI on pension income whatever age you are. You do though continue to pay NI on earned income until you reach state pension age which for most of us now will be 66/67 or older.
Women born before 1950 will stop paying at 60.