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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am years young and have available a private pension pot

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I am 69 years young and have available a private pension pot of £46000
I have already taken the 25% tax free amount some three years ago.
My provider will not allow me to switch to another type of fund, only options are transfer or withdraw the total amount of £46000. I have an annual income of £10250 (state pension) are you able to give me an idea of what Tax I will pay on the £46000 withdrawal please. Thank you

Leave this with me while I do a calculation.
Customer: replied 2 years ago.

I look forward to your reply

Hi again.

I'm assuming you will take the £46,000 in the 2015/16 tax year.

If you add your state pension of £10,250 to the £46,000 pension withdrawal, you will have a total income of £56,250. Your personal allowance of £10,600 will be deducted and you will pay tax on £45,650.

The first £31,785 will be taxed at 20% (£6,357.00 ) and the balance of £13,865 will be taxed at 40% (£5,546.00). Your total tax liability will be £11,903.00.

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

Thank you for your prompt reply, Would the pension provider take the tax liability away from the £46000 and pay me the net amount.

The reason I ask is I have been told that pension providers are taking either 45% or 55% and it is then upto me to sort out any problems or overpayments with HMRC at the end of the Tax year

Thank you

The 55% tax rate will only apply to those who are aged under 55 and who are cashing in their pension early so that should not apply to you..

The 45% tax rate is the top rate of tax for those with incomes in excess of £150,000 per annum.

I've read conflicting articles about this but my understanding is that the provider should ask what your other income will be and use that to calculate the tax on the pension fund withdrawal. According to some articles, it may be a problem for those who don't have a tax code. As you only receive state pension, you won't have been issued with a tax code.

If your provider simply deducts a straight 40% or 45%, you can make a claim for an in year tax repayment on a form P50Z instead of waiting to the end of the tax year to get the excess tax back. It would be worth a phone call to your provider to find out what they intend to do as it would not surprise me if different companies adopted different policies.

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