Perhaps one of the most important things in the new pension world is to beware of inadvertently tipping yourself into top-rate tax. Any money that you withdraw from your pension fund, apart from your tax-free lump sum will be counted as income in the tax year that you take it. So if you are still working or have other income of, say, £40,000 a year and you cash in a £40,000 pension fund, £10,000 will be tax free, but the remainder will be taxed, meaning you would have a total income of £70,000 in that year, pushing you into the 40 per cent tax band for much of your pension withdrawal. If you took £150,000 from a pension fund then you would push yourself into the 45 per cent tax bracket.
Enable’s pension advisors are concerned that many will inadvertently overpay tax – it is essential to be aware how much tax you will lose if you cash in your pension fund early or take out a large amount. If you delay taking your pension money until your other income falls, or if you plan to take out smaller sums at a time, the tax you pay should be much lower.
Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE
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