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Sam, Accountant
Category: Tax
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I am due to draw my personal pension in November 2016, under

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I am due to draw my personal pension in November 2016, under the new rules l will be able to take 25% tax free, and the remainder as a lump sum taxed at my personal tax. My question is to reduce the amount of tax l would pay, if l reduced my income in the taxable year (what year would that be) to below the amount that l wold pay tax, would the remainder of my pension lump sum become tax free. Is this possible?
Thanks for your question, I am Sam and I am one of the UL tax experts here on Just Answer.
Unless your only income for the year 2016/2017 (the tax year in question) was less than £10,000 and this includes the 75% remaining pension pot, could you avoid taxation.
As things stand the first
£10,000 is tax free and the next £31,865 at 20% and then between £31865 and £150,000 at 40% (but any income the breaches between £100,000 and £150,000 will see a loss of personal allowances, which represents £1 loss of allowance per £2 of excess income.
The personal allowance may well increase by a small amount by 2016/2017, but only marginally so.
It may well be prudent to leave the remaining 75% in the pension pot, but do seek independent financial advise to weigh up all of your options.
Let me know if you have any follow up questions
Customer: replied 3 years ago.

ok, my pension pot at present stands at £210k and may be as high as £230k by November 2016, if l am understanding your answer correctly, the first 25% of the £210k to £220k will be tax free, will the remaining 75% of my pension pot be taxed as income?

So to reduce the amount of tax i pay on this l have to reduce my tax code accordingly, namely downwards, if l am receiving my pension pot in the year 2016, do l have to reduce my tax code the year before, at present my income is a mixture of a small £5.5k/year pension from my deceased wife, small monthly pay and director dividends.

Does the above make a difference to your answer?

Hi Angus

Thanks for your response Your understanding - that the first 25% of the full pension pot, which you estimate will be at £210K - £230K by November 2016 is correct - So a ump sum of £52500 to £57500 will be tax free.

If you then take the remaining amount, which will be between £157500 and £172500 and you already have an income of £5500 then if you take the full pot then your tax position (based on this year allowances and tax rates) to include the taxable 75% of the pension pot will be as follows

Total income for tax purposes

Pension £5500

75% pension pot £157500 - £172500

Total income £163,000 - £178,000 No personal allowances as income in excess of personal allowance entitlement (£120,000)

Liable to tax £157500 - £172500

First £31865 x 20% = £6373

Next £118135 x 40% = £47254

£13,000 - £28000 x 45% = £5850 - £12600

Total tax due between £59477 - £66227

So from the original pot (including the 25% tax free element) from £210,000 - £230,000 you will have between £150523 and £163773 left over in your pocket, by taking 100% out of the pension pot.

This is a huge amount to lose on tax, so please do take financial advise

Thanks Sam

Sam and other Tax Specialists are ready to help you
Customer: replied 3 years ago.


Yes it is a lot to pay on tax, so it seems that the new pension rules are a means of raising tax for the government, l will have to look into my options further before l may any decisions, the good thing is that l am thinking about it now.

Thanks for you answers, l will complete payment process now.



Hi Angus
Thanks for your response
It does seem so doesn't it - an exercise to put more money in to the coffers !
Thank you so much for the rating, much appreciated