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bigduckontax, Accountant
Category: Tax
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I have an NHS final salary pension. If I were to retire in

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I have an NHS final salary pension. If I were to retire in Nov 2016 my lump sum would be aprrox. £84,000. Would I pay 40% tax on £24,000 only or would what I have earned this year be taken into account so I would pay 40% over more. I earn £35,000 a year. Would it make more sense to retire in April 2017
thank you

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

25% of your lump sum is tax free leaving 63K exposed to tax at your marginal rate. It will be added to your earnings in the year of payment and taxed accordingly ie most of it at 40%.

It would thus make sense to defer receipt of the lump sum to a tax year when your earnings are reduced.

I do hope that you have found my reply of assistance.

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Thank you for your support.