Making sure you get a lot from your pot
it and the rest as if it were a salary at their income tax rate. HMRC tells me the serious ill-health lump sum rule is still in place, and means most with less than 12 months to live can take pensions as a lump sum even if under 55, and if under 75 it’s ALL free of income tax providing the provider allows it.
If you’re over 75 then the best route is still likely to be taking your money out under the new pension freedom rules. Here the ‘personal allowance’ means you can usually earn £10,600 per tax year without paying income tax. Everything above that until £42,000 is at 20 per cent tax, above that 40 per cent tax.
So add your pension withdrawal onto your other earnings to see what tax you’ll likely pay. You also need to be aware of being charged ‘emergency tax’ which can mean in the short term you pay more and have to claim it back. I would call the government’s Pension Wise service on 0300 330 1001 to talk through your personal circumstances.
QI’m looking for a low standing charge and high unit charge energy tariff for the property I’ve just bought as I won’t be there much so will use very few units. Christine Martin says: As you know energy bills are made up of two elements – the standing charge (a bit like phone line rental) and the unit charge (where you pay for usage – a bit like call costs). You can have a zero standing charge at ebico.org.uk but I wouldn’t automatically assume it’s cheapest for you – others with low standing charges may still win. I’d still go via a comparison site – such as my own cheapenergyclub.co.uk or any ofgem.gov.uk approved site. Just ensure that when it asks for your annual usage, instead of entering the data in pounds you do it in Kilowatt Hours (the measure of energy use) and keep that low.
QMartin Lewis,
MoneySavingExpert.com We have joint accounts and one of our incomes is under £15,000 the other just over, but the combined income is less than £30,000. Can we still register to have interest paid gross? Jonhaze Martin says: The amount you can usually earn without paying tax is £10,600 but since April, you’ve also been allowed to earn £5,000 on top in savings interest without paying tax (mainly to benefit pensioners who live off savings). However, you lose a pound of savings allowance for each £1 over £10,600 you have of earned income. So if you earn £12,600, only a further £3,000 of savings interest is tax free, any more is taxed. You can only register with the savings provider to have this interest paid gross, ie before tax, if your total income including savings interest is under £15,600. Otherwise you’ll have to claim it back at the end of the year. The fact your accounts are joint is somewhat irrelevant. In general the interest earned on a joint account is allocated fifty-fifty for tax purposes – so just half it and see where each of you stands. It may be beneficial to withdraw some of the money from the joint account and put it in a savings account solely in the name of the lower tax payer, to maximise their tax-free savings allowance.
Do you bank with Barclays? Would you like a free £48 a year?
Barclays has a new ‘ Blue Reward’ option on most of its free current accounts. It costs £3 a month, but pays you £7 back, so you’re £4 up. Plus, if you’ve also got its mortgage you get an extra £5 a month and if you’ve got its home insurance, £3 a month. To qualify you need to have £800 going into the account every month, two direct debits set up and bank online or via the app.
But there are far better deals out there if you’re willing to switch – free £150 switching bribes, 5 per cent savings interest, cashback on bills. Full rundown in mse.me/bankaccounts.