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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 10250
Experience:  FCCA FCMA CGMA ACIS
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I am considering retiring, and to supplement my flexible

Customer Question

Hi. I am considering retiring, and to supplement my flexible drawdown, I am considering asking the pensions advisor to also invest some savings. Obviously the pension will be subject to income tax at the current rates, but how would the savings amounts be taxed? If I take small monthly amounts I can't work out what the tax burden would be.
JA: Which tax year is this for?
Customer: Also, are there charges for this service?
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: Current tax year onwards.
Submitted: 13 days ago.
Category: Tax
Expert:  bigduckontax replied 13 days ago.

I am in a slight quandry, what exactly are you intending to do? Withdrawing your pension fund in dribs and drabs?

Customer: replied 13 days ago.
My quest relates to a separate investment to the pension. If I also ask my financial advisor to invest some savings fo me, say £200k, I’m not sure how I’m taxed on the profit. I presume I only pay tax on what I ‘sell’ but I don’t understand how it works.
Expert:  bigduckontax replied 13 days ago.

You will be liable to Capital Gains Tax (CGT) on any profit made on disposal over 12.3K per tax year and also liable to Income Tax on income earned over your Personal Allowance, currently 12.57K

Customer: replied 13 days ago.
Ok, but if I withdraw my savings investments at a rate of, say, £1k per month would I be taxed on the £1k?
Expert:  bigduckontax replied 13 days ago.

There is no tax on savings withdrawal and such small sums would be unlikrly to trigger CGT.

Customer: replied 13 days ago.
Ok, thanks. I suppose I only pay CGT on any profit if I cash in the whole investment.
Expert:  bigduckontax replied 13 days ago.

No only on the profit you made on the investment sold.

Customer: replied 13 days ago.
but I presume that would only be payable when I cash in the whole investment. It seems a bit arbitrary to me.
Expert:  bigduckontax replied 13 days ago.

Maybe, but that is how CGT works. Cashing in in dribs and drabs is not to be recommended; you will merely fritter away the overall pot.

Customer: replied 13 days ago.
It’s there to be frittered to some extent as it’s intended to top up a flexible drawdown pension. I would hope that they would be able to increase it at a rate where I wouldn’t need to dip into the original amount invested. No guarantees of course.
Expert:  bigduckontax replied 13 days ago.

No, indeed.

Customer: replied 13 days ago.
Thanks. I’ll get back with another question if I need to.
Expert:  bigduckontax replied 13 days ago.

Delighted to have been of assistance.