Pensions And Retirement Blog

How To Avoid Overpaying Tax on Your Lump Sum Withdrawals

How To Avoid Overpaying Tax on Your Lump Sum Withdrawals

If you choose to take advantage of the Pension Freedoms act and take a lump sum from your pension pot, you could end up paying too much in tax.

Since the introduction of the Pension Freedoms Act, savers are now able to access their pension pot at the age of 55 and take up to a quarter of it tax-free. Any withdrawals on the remaining 75 percent are taxable at the individual’s current income tax rate. However, the Inland Revenue is having a few teething problems when it comes to The Pension Freedoms. As a result, many savers withdrawing a lump sum from their pension pot for the first time, are being charged emergency tax rates instead of their current tax rate.

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