Semi retirement & taxes?

[ukmtk]

Please forgive me if this has been asked many times before.

At the start of the new tax year I will be semi-retiring. I will reduce my workdays to 3 a week and collect my company pension (aged 60).
This will actually leave me with a larger basic salary than I was earning for 5 days a week.

My question is how will this be taxed? Will I need to start completing an annual tax return? As I was a simple PAYE I haven't completed one for over 20 years. I pay tax at 40% but this is significantly reduced by my tax code for my SIPP contributions - which will continue as before.

My assumption is that as my income will be split between 2 sources then neither will be paying the 40% until HMRC apply a correction?
I had also assumed that my "main" tax code would apply to my normal employment (the larger source of income)?

Many thanks in advance for any help/suggestions.

[mark88man]

So not an expert but it does feel to me like although you might not be obliged to do an assessment unless your salary is quite high, it might be best to. That way you won't get any surprises when it turns out the revenue haven't been collating your figures.

As someone who has used Self Assessment as a double check mechanisms it won't take you more than an evening (maybe 2 of hours at most) so its not a chore. I have single employment but make SIPP donations up to the AA every year and also have charitable and work expenses. I find it just helps although the tax codes I get are getting more accurate by the year.

[Adamski]

(I'm still working so not done myself) but think you'll get a temporary tax code on your pension, where you'll overpay tax. You'll then either wait until hmrc sort out or fill out form P55 online to claim refund (commonly done here).

[DrFfybes]

In MrsF's case, the PAYE remained on her part time salary, and the pension is taxed with no allowance.

Despite both ostensibly being from the same organisation, the pension scheme has no sight of her salary, and vice versa, so If her salary drops below the £12.5k allowance, or the combined income exceeds the 40% tax threshoild, then she needs to do a tax return.

The upside is that if she does eventually retire, her pension will increase by about £200/month when her Personal Allowance moves over.

Paul

[Dod101]

The upside is that if she does eventually retire, her pension will increase by about £200/month when her Personal Allowance moves over.

Are you planning to keep her working indefinitely? That's the way to do it!

Dod

[tjh290633]

What I think you will find is that your tax code on employment will be adjusted to reflect your pension, which itself may be taxed at basic rate, with a tax code of BR. When your state pension kicks in, that will lead to a reduction in your tax code, as it is paid gross.

There are further complications if you have to pay higher rates of tax.

TJH

[DrFfybes]

The upside is that if she does eventually retire, her pension will increase by about £200/month when her Personal Allowance moves over.

Are you planning to keep her working indefinitely? That's the way to do it!

Dod

She was supposed to finish in March. However the 2(!) people they have got to replace her are both pregnant, and her plantar problem will limit what we could do over the summer. Thus when they offered her to stay on with her pick of projects to cover the maternity leave, going back to 17.5 hours per week (done as 2 long days) then she decided to stay on.

The good news is this will cover the double glazing and part of the house works, leaving more money in my McLaren fund. The bad news is that "there's no point in buying one this year as we'll not use it if I'm working". I think her plan is to put me off until I'm not able to get into one any more.

And just to drag this back to something vaguely relevant, the change in hours and increase in pay and pension in April will mean I need to work out what her Salary Sacrifice AVC will be from April on in order to being her back out of 40% tax.

Paul

[Dod101]

Are you planning to keep her working indefinitely? That's the way to do it!

Dod

She was supposed to finish in March. However the 2(!) people they have got to replace her are both pregnant, and her plantar problem will limit what we could do over the summer. Thus when they offered her to stay on with her pick of projects to cover the maternity leave, going back to 17.5 hours per week (done as 2 long days) then she decided to stay on.

The good news is this will cover the double glazing and part of the house works, leaving more money in my McLaren fund. The bad news is that "there's no point in buying one this year as we'll not use it if I'm working". I think her plan is to put me off until I'm not able to get into one any more.

And just to drag this back to something vaguely relevant, the change in hours and increase in pay and pension in April will mean I need to work out what her Salary Sacrifice AVC will be from April on in order to being her back out of 40% tax.

Paul

Sounds good I must say.

Dod