Re: PEP or not?


<onmyd@xxxxxxxxxxx> wrote in message
news:1193307798.664784.244020@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I have a BT Single Company PEP with Halifax. I am over 65 and
my
marginal tax rate is the basic rate. How do I work out if it is
better for me to keep these shares in or out of the PEP?

Is your marginal rate really basic rate? In the (approx) 21,000 -
25,500 range pensioners (65+) have a 33% tax band (basic rate
+50%)
due to the withdrawal of the additional personal allowance.

PEPs can't reclaim the tax credit so if you're marginal rate
really is
basic rate (accounting for above) then you aren't saving any
income
tax by having it in a PEP.

You may save CGT when you sell by having it in a PEP, but the
annual
allowance is quite high anyway (about £9000) and only gains after
you
take it out of the PEP would count.


I'm only earning about 15k a year - and don't fill out a tax form.
My
pension is taxed at before I get it. I don't pay any additional
income tax. Could you explain the calculations behind your
conclusion? I would like to understand the gain / loss between the
2
options.

Right - so assuming your income isn't going to be greater than £20,900
(including dividends, savings, state pension etc), you won't get your
personal allowance reduced so it should be £7550 or £7690 if you're
over 75. So you don't need to worry about that.

So both in and out of the PEP dividends are treated the same - no
further tax to pay but the tax credit can't be reclaimed.

Outside the PEP any gain would be liable to GCT, but only if you make
gains of more than £9,200 in a tax year (this is paid on sale). If
this is likely you could always spread the sale over two or more
years.

--
Andy


.

Relevant Pages

  • Re: PEP or not?
    ... better for me to keep these shares in or out of the PEP? ... income tax. ... So both in and out of the PEP dividends are treated the same - no ... further tax to pay but the tax credit can't be reclaimed. ...
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  • Re: PEP or not?
    ... better for me to keep these shares in or out of the PEP? ... Is your marginal rate really basic rate? ... PEPs can't reclaim the tax credit so if you're marginal rate really is ... allowance is quite high anyway and only gains after you ...
    (uk.finance)