Smart pension

[Toemonster]

Hi all I hope someone can offer me some advice , I’m 55 and have a small pension pot ( less than £9000) I’ve decided to cash in my pension and just enjoy the high life for a few months, I’m not too worried about managing financially in the future as DH has substantial pensions that will support us both in old age , my question is do I have to pay tax on my pension? I’m in Scotland if that makes any difference many thanks for reading this far .

Yes,. Under £10k the entire amount can be taken in one go, where 25% would be tax free and 75% would be taxable at your usual tax rate. So if you pay tax will depend on your earnings in that financial year.

Your pension provider will likely get an emergency tax code to use, so assume you would have tax deducted at 20%, and then you can use form P50z (I think) to reclaim overpaid tax if no other income.

Well it depends if you are using your full personal allowance, are you employed? Full time? Part time?
Whatever you do, use the ‘small pots’ allowance for getting at the money.
If you don’t use your full personal allowance, do you give your DH the married allowance of £1260?

Also, if you’re not a tax payer / using your full personal allowance, you can open a Sipp, pay in £2880 and get £3600 with tax relief, so £720 free money for every year you’re not a tax payer, up until you are 75.

Thank you both so much for replying, I do work but only part time , I don’t give my DH the marriage allowance for tax purposes I pay on average £12-£15 a month on tax

Then you will pay 20% tax on the 75% taxable part of the pension. So £1350 tax.

However you might pay emergency tax if you take the taxable bit as a lump sum and have to claim back the overpayment.