With the cost of living crisis worsening, tax experts are warning people not to make hasty decisions regarding their pension pots.
The LITRG (Low Incomes Tax Reform Group) are concerned that rash decisions to take money out of pensions could result in costly mistakes – their warning comes after the recent launch of a government call for evidence on ‘Helping savers understand their pension choices’.
The LITRG says that people often do not understand enough about the tax consequences of their decisions.
Kelly Sizer, Senior Technical Manager for LITRG, explains, “We know of people who have received very large tax bills, often unexpectedly, since pension flexibility began. For example, in households where there is a child benefit claim in place, tax charges can include a high income child benefit charge when a pension withdrawal pushes the person’s adjusted net income over £50,000. This also means the taxpayer must notify HMRC they are liable for the tax and fill in a Self Assessment tax return.