HMRC warns people over Premium Bonds 'investing'
HMRC has issued a caution to taxpayers considering transferring funds from their private pensions into other investments, such as Premium Bonds. The tax authority, now operating under the Labour-led government, responded to concerns raised by users on Twitter /X.
A taxpayer queried: "Hello, I would like information on tax allowances and state pensions. We are a married couple both receiving state pension and a small private pension individually. The wife recently had tax deducted from the private pension payment. part 1."
"She has applied for the marriage allowance to be allocated back to her. (April 2025) How can we prevent further tax bills when accessing private pension and/or other saving schemes? part 2. If money was removed from the private pension of either individual to be invested elsewhere, e.g premium bonds."
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"What rules are there regarding tax demands? Take out £10,000, pay 20% reinvest and pay 20% again on any dividends. It seems the tax is applied multiple times. part 3."
They added: "Our financial advisor is not helping because if the private pensions are closed, he stops getting a fee," reports Birmingham Live.
"But the lump sum is not returning enough to leave it where it is. part 4."
In response, HMRC stated: "You only pay Income Tax if your taxable income - including your private pension and State Pension - is more than your tax-free allowances (the amount of income you're allowed before you pay tax). 1/".
"Further details about dividend tax and rates can be found at this link."
If you're a shareholder, you might receive a dividend payment. You're entitled to a certain amount of dividend income each year that's tax-free.
You won't have to pay tax on dividend income that's within your Personal Allowance the threshold of income you're allowed before taxes kick in. Additionally, there's a dividend allowance for you every year.
Tax is only due on dividend income exceeding that allowance.