Pension tax

I've started receiving an old pension (first payment was 28th March), which is paid gross of tax. As I'm still working, I need to pay tax on the extra income. What are my options for doing this? I'm assuming I just need to fill in a self assessment form at the end of 2024, and pay what I owe at that point. Is that correct, or is there anything else I should be doing?

You could do this or you could go onto your personal tax site on HMRC, update your earnings and HMRC will change your tax code so you pay the correct amount each month

If you are working do you really need it, can you not delay it until you stop, surely that would put you in a better tax position

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Originally Posted by ryanb741

You could do this or you could go onto your personal tax site on HMRC, update your earnings and HMRC will change your tax code so you pay the correct amount each month

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Thanks, I'll look at that.

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Originally Posted by adrianw

If you are working do you really need it, can you not delay it until you stop, surely that would put you in a better tax position

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It's a defined benefit scheme, and that wasn't an option. I'm viewing it as 'free' money, and putting it into a S&S ISA.

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Originally Posted by hogthrob

I've started receiving an old pension (first payment was 28th March), which is paid gross of tax. As I'm still working, I need to pay tax on the extra income. What are my options for doing this? I'm assuming I just need to fill in a self assessment form at the end of 2024, and pay what I owe at that point. Is that correct, or is there anything else I should be doing?

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Sounds like the administrators haven’t applied PAYE correctly to your pension. It’s definitely pension and not tax-free cash?

Yes, it's definitely a pension (and not tax free cash), from a company I left many years ago.

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Originally Posted by hogthrob

Thanks, I'll look at that.





It's a defined benefit scheme, and that wasn't an option. I'm viewing it as 'free' money, and putting it into a S&S ISA.

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If you put it into a SIPP (subject to not already putting in the annual limit of 60k next year with other contributions) it will be free of tax so you get an instant 20 or 40% uplift.

If you don't need the extra cash, and salary sacrifice is an option in your workplace, then it would be most tax efficient to sacrifice an equivalent value from your earnings into a pension, and use the DB pension to live on. Saves you tax and NIC now, and also 25% tax free when you start to draw that pension down in the future

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Originally Posted by hogthrob

Yes, it's definitely a pension (and not tax free cash), from a company I left many years ago.

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That's very odd then. Assuming it's a UK scheme, pensions should be paid under PAYE. I'd ask teh question of them. At the very least, you need to be certain about the figure that you will need to be disclosing as untaxed.

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Originally Posted by David_D

That's very odd then. Assuming it's a UK scheme, pensions should be paid under PAYE. I'd ask teh question of them. At the very least, you need to be certain about the figure that you will need to be disclosing as untaxed.

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I'm not on their payroll, so not sure how it could be PAYE? Additionally, the pension company is a separate entity to the former employer. They don't know what my earnings with my current employer are, so also couldn't apply the appropriate rate of tax.

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Originally Posted by t955daytona

If you put it into a SIPP (subject to not already putting in the annual limit of 60k next year with other contributions) it will be free of tax so you get an instant 20 or 40% uplift.

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I'm not sure if I can make changes to my pension contributions before next year's ' benefit window'. Apart from that, I took some tax free cash from the older pension, so don't think its allowed to put it back into a pension?

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Originally Posted by hogthrob

I'm not on their payroll, so not sure how it could be PAYE? Additionally, the pension company is a separate entity to the former employer. They don't know what my earnings with my current employer are, so also couldn't apply the appropriate rate of tax.

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It should still be taxed on an emergency code pending HMRC telling them what tax code to use.

This may help with continuing to pay into a pension.

https://www.investorschronicle.co.uk...-personal-one/

OK, a quick update: seems I was wrong about pretty much everything :peaceful:


I have a PAYE number with the pension scheme, and they produce monthly payslips that detail the amount paid, tax paid etc. I've checked my tax code, and I'm on an emergency code, so I think I'll wait till the next payment to make sure it's all looking correct.