Taxes!!

sg0

sg0

sg0

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10 Jan 2013
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297
Morning,

Tomorrow I will call Utmost pensions to clarify a few things but I’m hoping perhaps someone here is in the know about this sort of stuff.

My solicitor is asking for instruction concerning a pot of money that is in a scheme that my dad set up years ago. He’s passed now and that money was calculated as part of his estate and inheritance tax was paid on that money (IHT 400).

So now I have to pay more tax on that pot. The provider has sent a letter to my solicitor who is dealing with the estate on my behalf stating that if the money is sent to a company (in this case a solicitor), 45% tax is due. If it goes directly to individuals then income tax is due.

I just can’t get my head round the astonishing amount of tax that is being deducted on this pot! It’s only 30k (when I mean only in relation to 40% inheritance tax and 20% income tax then 50% income tax when I’ve gone over the higher band)
 
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Sorry for your loss.

I'm not an expert at all, but I wouldn't have thought it was classed as an income if it's been taxed for inheritance purposes?
I'd have thought you only paid income tax on anything it earned after the point the IHT had been paid.
 
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Probably just confusion, can’t he just tell them to send it to you?
 
A pension usually isn't part of the estate, and therefore not subject to inheritance tax. There must have been a particular reason it was in this case, or a mistake. This rule is changing next year.

Obviously when drawing from a pension you'd expect to pay income tax at your marginal rate when you withdraw income from it to fund your retirement.
 
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Slam62 said:
Probably just confusion, can’t he just tell them to send it to you?
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I could but I can’t believe that amount of tax is being deducted. I have read that some financial products ie pensions that pay out lump sums after death are inheritance tax exempt but income tax is then used. This seems like this is happening here. I don’t think this should be hitting 3 tax deductions?
 
Werewolf said:
Sorry for your loss.

I'm not an expert at all, but I wouldn't have thought it was classed as an income if it's been taxed for inheritance purposes?
I'd have thought you only paid income tax on anything it earned after the point the IHT had been paid.
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Same here mate.
 
throwaway4372 said:
A pension usually isn't part of the estate, and therefore not subject to inheritance tax. There must have been a particular reason it was in this case, or a mistake. This rule is changing next year.

Obviously when drawing from a pension you'd expect to pay income tax at your marginal rate when you withdraw income from it to fund your retirement.
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This is where I’m at. I think the solicitor messed up here
 
Participant said:
Taxes are a ******* joke in this country, dividend tax is going again up next fiscal year and other rises are certain as Reeves's spending and borrowing spirals further out of control.

No point in working hard with 25% corporation tax then 39% on top of that.
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Go on benefits, probably earn more.
 
You don't say what kind of product/pot this is - this is needed to give useful advice.
If it's a defined contribution scheme of some kind then whether you owe income tax on the withdrawals you make from an inherited pot would depend on the age your parent died. Before 75, it's tax free. After 75, income tax is owed like it would be with your own pot. If income tax is owed, you shouldn't have to draw it all down in one year. I.e. you could take half this year and half next year if that helps you avoid moving into the 40% income tax band.
If it is a DC pot, IHT shouldn't have been paid on it.
 
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Participant said:
Taxes are a ******* joke in this country, dividend tax is going again up next fiscal year and other rises are certain as Reeves's spending and borrowing spirals further out of control.

No point in working hard with 25% corporation tax then 39% on top of that.
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Accountant complains about one of the things which provide him with a job and salary?

A rare treat indeed.
 
Participant said:
Taxes are a ******* joke in this country, dividend tax is going again up next fiscal year and other rises are certain as Reeves's spending and borrowing spirals further out of control.

No point in working hard with 25% corporation tax then 39% on top of that.
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Why do you then if there's no point?
 
The OP never mentioned a pension, simply "a pot of money that was in a scheme".

I'm guessing an off/on shore bond or some such, but would need to be clarified by the OP
 
Without know exactly what "scheme" you are talking about there is literally no point in speculating about it.

You will need the exact information and details in order to understand what tax and why.
 
My wild guess is that it could be a bond with a linked life policy, and the estate is liable for tax. No idea why the tax is different depending on whether it goes to a company or individual - surely it should go into an executor account whether managed by an individual or solicitor. Unless perhaps the bond is in joint names and the tax situation is different if it is being sold or transferred into the sole name of the other holder.
 
adidan said:
Why do you then if there's no point?
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I won't be, I'm retiring as soon as there's £1m in my pension.

When I started, the dividends from a limited company were incentivising entrepreneurs. Now they are not. So I'll retire earlier than planned and pay less tax than if I felt it was worth continuing to grow and work longer for my family.

Every tax ratchet gets me closer to the point where I'm no longer incentivised to create growth or wealth in the economy, which is the result of Reeves's anti-growth policies.
 
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