20 April 2015

Cashing in a Pension Plan

Since 6th April 2015 it has been possible to withdraw an entire pension plan given certain conditions. That is not necessarily the best thing for anyone to do and it is worth getting professional advice before doing so. One of the reasons for that is to fully consider the tax implications, since 75% of the value is generally taxable as though you had earned it, and there may be more tax-efficient ways to achieve your objectives.

But if you do decide to go ahead and withdraw a pension you may initially pay more tax than you should do. That's because the pension provider may tax you at the emergency rate (in the absence of a P45 which you get when you leave a job). You would eventually get a tax refund, but possible not until later in the tax year (or even the next one).

You can now request that HMRC give you a tax refund more quickly by completing:
- a P50Z form - if you have no other income
- a P53Z form - if you do have other income
- a P55 form - if your pension withdrawal doesn't take all of the pension out

Search for those forms at www.hmrc.gov.uk.

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