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tax advice please on lump sum

happyfella

hi, we are trying to work out our finances. My wife who will be 65 in august will be receiving a lump sum pension of £6,000 in august. She works and comes out with £770 every four weeks. i do not work as i receive full pip for both and unable to work. i have just checked on the tax calculator and it says when my wife receives her lump sum she will have to pay £1,400 tax on it. can i confirm that is correct, and also can i ask, if they will take it in one go from her pension pot or will they take it each month from her wage. at the moment she does not pay tax due to how little she earns. will this lump sum also affect her receiving the carers element on universal credit. any advice would be great, as we are trying to plan for the future.

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happyfella

hi, sorry, yes that is the full value of the pension pot. her normal yearly wage is £10,100 her pension is with her currently employer through legal and general

Lisatho11987777

I took my pension pot out last year it was 12,000 but I received 10,000 mine was tesco pension

happyfella

lisathomas50 said:

I took my pension pot out last year it was 12,000 but I received 10,000 mine was tesco pension

what age are you if you dont mind me asking, and did you carry on working at tesco. my wife works there, and this is the second pension. she receives £90 a month from the first pension pot, so she wants to take it all for the second pension, but does not want to be hit with a big tax bill.

calcotti

Remember that if the lump sum together with any existing savings takes your joint savings over £6000 you need to inform UC.

The inclusion of the carer element in your UC calculation is not affected

happyfella

calcotti said:

Remember that if the lump sum together with any existing savings takes your joint savings over £6000 you need to inform UC.

The inclusion of the carer element in your UC calculation is not affected

thank you.

happyfella

it is before tax. it is a private and work pension. what i did ref the tax, i put it in a tax website. i added her wages for the year and then added the lump sum on top and it come out with £1,400 tax

happyfella

what i did was to add the pension together and my wifes wages and then the lump sum using this https://www.moneysavingexpert.com/tax-calculator/ and this is what it came out with, but i will speak to legal and general. so i added her 4 weekly wage, to her pension, and then the lump sum.

Lisatho11987777

I left tesco didn't work for 6 months then I did another job I took it out when I was 55 I now have another pension

calcotti

Happyfella, if the £6000 is the gross amount of the pension payment and 25% will be tax free then you should only take £4600 into account when calculating the tax liability.

Also, you should put that figure in the pension box, not the wage box (because NI is calculated on the wage but is not due on the pension).

Don’t know where tax free allowance of £11,329 comes from. Tax free allowance for 2021-22 is £12,570. Does she have other circumstances that reduce her allowance?

happyfella

calcotti said:

Happyfella, if the £6000 is the gross amount of the pension payment and 25% will be tax free then you should only take £4600 into account when calculating the tax liability.

Also, you should put that figure in the pension box, not the wage box (because NI is calculated on the wage but is not due on the pension).

Don’t know where tax free allowance of £11,329 comes from. Tax free allowance for 2021-22 is £12,570. Does she have other circumstances that reduce her allowance?

thank you for that.

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