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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am considering retirement, I think my NHS pension will work

Customer Question

I am considering retirement, I think my NHS pension will work out at approx. £20k per annum and a lump sum of approx £100k. Will I have to pay tax on my lump sum and approx what rate and what allowances exist on both my lump sumand annual pension ?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Is the lump sum you have been offered a payment from your NHS pension fund in lieu of an NHS pension greater than £20,000 per annum?
Customer: replied 2 years ago.

yes , the estimate of my pension on retirement in 1 year is either £20k pa and a lump sum of £60K or I can commute my annual pension to £16K and take a lump sum of £100K . On top of this I will have about £8K state pension

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

There are limits to the amount of your pension that can be commuted for a tax free lump sum. THE NHS pension fund trustees will have calculated that so your lump sum should be tax free. Take a look here for more information.

If you have an annual income up to £42,385, the first £10,600 will be tax free (the personal allowance) and the balance will be taxed at 20%.

I hope this helps but let me know if you have any further questions.
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Customer: replied 2 years ago.

I now know that the first £10.6 K will be tax free on my income , ie. my annual pension but what about my lump sum ?

Expert:  TonyTax replied 2 years ago.
The lump sum will be tax free. Here is my answer from earlier today:

Hi again.

There are limits to the amount of your pension that can be commuted for a tax free lump sum. THE NHS pension fund trustees will have calculated that so your lump sum should be tax free. Take a look here for more information.

If you have an annual income up to £42,385, the first £10,600 will be tax free (the personal allowance) and the balance will be taxed at 20%.

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