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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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would I be better taking my state pension now, the lump sum

Customer Question

would I be better taking my state pension now, the lump sum and my weekly pension or defering it longer untill I decide to retire.
Submitted: 4 years ago.
Category: Tax
Expert:  TonyTax replied 4 years ago.
Hi.

Can you tell me roughly what your annual income will be once you retire fully please.
Customer: replied 4 years ago.


My only income after I retire would be my state pension, it would currantly be £110.79. But I would take a lump sum of £45,823.89 before tax. My current monthly wage is £1587.92. and enjoy my job and feel I could continue to work, but would like to make the best financial decision for the future. I own my own home and run a car.

Expert:  TonyTax replied 4 years ago.
Thanks.

If you did not take your lump sum until after the end of the tax year in which you stopped working, then your income from state pension would be less than your personal allowance and you would pay no tax. Therefore, your top tax rate would be 0% and you would pay no tax on your lump sum. The tax year ends on 5 April each year.

Currently, a pensioner under 75 on an annual income of £10,500 or less pays no tax.
Customer: replied 4 years ago.

I am not quite sure what you mean,do you mean if I retired 27th Feb 2014 and did not claim my pension untill after 5th April 2014 I would pay no tax on my lump sum, or do you mean I would have to wait untill after the following April 2015 before I could claim my pension in order not to pay tax on the lump sum

Expert:  TonyTax replied 4 years ago.
If you retired on 27 February 2014 and took your lump sum after 5 April 2014, provided your income in 2014/15 was less than around £10,500, you would pay no tax on the lump sum.
Expert:  TonyTax replied 4 years ago.
Take a look at the first paragraph under the heading "Tax years 2008/09 onwards" here. It says "that if the individual isn't liable to tax for the year of assessment on their other income, no tax should be deducted from any state pension lump sum."