You get the fixed 2000 allowance against earned income which includes pensions, but not personal annuities, which are classed as investment income.
The variable Low Income allowance applies to earned income, but if you have more than 6500 you don't get it.
Sid
income tax online simulator 2015
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Re: income tax online simulator 2015
So, a final salary or defined benefits type company pension is classed as "earned" income ( which I interpret generally as income from some form of employment)? An annuity is classed the same as interest or dividends?
I think my acquaintance and many others (perhaps myself included) are unclear on how certain types of income are defined and treated for tax. He doesn't even know if his pension is an annuity or not. And more importantly, I don't think many gestors understand the difference between different types of pensions.
I think my acquaintance and many others (perhaps myself included) are unclear on how certain types of income are defined and treated for tax. He doesn't even know if his pension is an annuity or not. And more importantly, I don't think many gestors understand the difference between different types of pensions.
Don't worry about what people think, they don't do it very often
"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.
"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.
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Re: income tax online simulator 2015
Pensions are earned income presumably because they relate to employment. Annuities are more complicated. It depends on the exact type of annuity. It needs to be a "money purchase" annuity where you took some money and invested it into an annuity of your choice. This is why it is considered an investment rather than earned income.
In the past, almost all employee pensions were some sort of salary linked scheme, now called "Defined Benefit" schemes. Now that these are generally being replaced with what are called "Defined Contribution" schemes the situation has become more confused as to whether these qualify for the tax advantages, because, like an annuity, a lump sum purchase was involved. In most cases, they do not.
My take on it is that if the pension annuity derived from a company scheme, it does not qualify. If it was money from self employment and in some cases, directors pensions, then it may qualify. The advantage of it being classed as an annuity is a huge tax saving.
Sid
In the past, almost all employee pensions were some sort of salary linked scheme, now called "Defined Benefit" schemes. Now that these are generally being replaced with what are called "Defined Contribution" schemes the situation has become more confused as to whether these qualify for the tax advantages, because, like an annuity, a lump sum purchase was involved. In most cases, they do not.
My take on it is that if the pension annuity derived from a company scheme, it does not qualify. If it was money from self employment and in some cases, directors pensions, then it may qualify. The advantage of it being classed as an annuity is a huge tax saving.
Sid
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