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Where Taxpayers and Advisers Meet

Optimal lump sum withdrawal from pension plan

moneyguy2016
Posts:2
Joined:Tue Aug 23, 2016 7:21 pm
Optimal lump sum withdrawal from pension plan

Postby moneyguy2016 » Tue Aug 23, 2016 7:34 pm

Hello

I am 60, non uk resident with a uk personal pension which I stopped funding in 1999 but has grown to over 100K.

I wish to take lump sum withdrawals and understand the 25% tax free/75% tax rule. The pension provider will withhold tax at source using the emergency tax code.
As I do not have any other UK income and expect to be overpaying on the emergency tax code, what is the maximum withdrawal I can make to stay within the 20% rate which I can claim back with the P45? Will I be able to claim the overpayment immediately or do I have to wait and file a self assessment tax return?

Thank you.

moneyguy2016
Posts:2
Joined:Tue Aug 23, 2016 7:21 pm

Re: Optimal lump sum withdrawal from pension plan

Postby moneyguy2016 » Tue Aug 23, 2016 7:54 pm

I forgot to mention that I think I am not eligible for personal allowances as the country I reside in is not covered by a tax treaty or listed in the R43 notes

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Optimal lump sum withdrawal from pension plan

Postby LozaACCS » Wed Aug 24, 2016 8:51 pm

I believe the availability of a PA is more important than you appear to realise.
We are advised that you are a non resident person with UK income.
Ignoring the PA at this point you are liable to UK income tax on your UK income.
For UK purposes pension income is disregarded income (S811 ITA 07)
There are 2 scenarios
If you do not qualify for the PA (you should check this again) then the position is clear, UK tax is levied on UK income which is not disregarded income (eg property income).
IT is only charged on disregarded income to the extent that it taxed at source, so if it is paid gross then no IT liability arises.

If you are entitled to a PA then you can choose to claim it or not.
If you do not claim it the position is as outlined above.
If you do claim it then all of your UK income is taxable in the UK (not your world wide income which some software suppliers suggest is the case) so you will be taxable on disregarded income but will have the benefit of a PA.


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