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I have left a job and therefore a pension plan. £70000 was

Resolved Question:

I have left a job and therefore a pension plan. £70000 was put into my bank account and I need to know how much tax should be payed. I am 56 years old and employed with another company
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

Could you advise what this £70,000 consists of, For example
1) is it 25% of your pension pot - or all of it
2) Redundancy/retirement payment - and if so how is it made up (salary, pay in lieu, holiday pay. bonus, commission, golden handshake
3) What your gross pay was to the date you ceased this employment
4) What your gross pay will be from this new employment between now and 05/04/2015
5) Whether you had any company benefits from either of these employments, such as company car, medical benefit etc - if so the gross value of these benefits
6) Any other income you are in receipt of, such as interest from savings, rental income etc

I can then advise the tax position

Thanks

Sam
Customer: replied 2 years ago.
1. The full amount.
2. Retirement plan. It was made up of monthly contributions by myself and matched by my employer.
3. My YTD at time of leaving was 42000.
4.. My new gross should be around 50000.
5. None.
6. None.
Expert:  Sam replied 2 years ago.
Hi Douglas

Thanks for your response

At face value only 25% of the £70,000 can be considered tax free (This is assuming this is the gross pay out and tax has not already been with held)- which leaves a tax position to consider on the remaining £56250

As your annual income on salary alone will be £92000 - then your total tax position for the year will be 148,250 - which will see you lose all your personal allowances (as income in excess of £100,000 sees you losing £1 of allowance of every £2 of excess income) but you will remain at 40% taxpayer (as its below the 45% threshold)
So the tax due will be approx.
£56250 x 40% = £ 22500
Plus the loss of personal allowances £10,000 x 40% = £4000
So I would expect you to owe approx £26,500 to HMRC (less any tax that the pension administrator has deducted from the payment, in which case, this can be set off against any tax owed, but note that the payment used of 75% of the £70,000 may be in fact higher, so do check your paperwork that would have been sent to you detailing this payment into your bank account )

Do feel free to ask any follow up questions

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13704
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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