Small Pots Payments
- These are defined as £10,000 or less in value.
- Taking a small pot payment does not trigger the MPAA or get tested against the LTA but they must have some LTA remaining
- If the small pot is uncrystalised then the payment is treated as a UFPLS, but if it is crystalised the entire payment is taxed via PAYE
Question - Use Your Note Taker To Jot Down Ideas / Calculations
Caitlin, who is 67, has taxable income of £12,000 in 2018/19. She has an uncrystallised personal pension fund of £9,000, which she would like to take as a small pots payment. How much, net of tax, will Caitlin receive?
Select one:
a) £5,400.
b) £7,650.
c) £7,200.
d) £9,000.
B)
25% of the pot is tax free with the remaining 75% of the pot is taxable at 20% due to her income.
Therefore (25% x £9,000) + (75% x £9,000 x 80%) = £7,650