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  • FIRST POST
    • hullfiona
    • By hullfiona 12th Oct 17, 1:05 PM
    • 16Posts
    • 7Thanks
    hullfiona
    100% crystallised SIPP - Tax on Drawdown
    • #1
    • 12th Oct 17, 1:05 PM
    100% crystallised SIPP - Tax on Drawdown 12th Oct 17 at 1:05 PM
    I was talking to a friend over lunch about our SIPPs and she mentioned that now hers is 100% crystallised as she has taken 25% tax free of the whole fund , but she also said that she she has been told that any amount she takes out will be taxed at 25%?

    I explained that I thought that was incorrect but she insists that this is what her financial advisory said.

    My understanding is that any amount that she takes out will be subject to income tax but that if its below her tax free amount then she wont have to pay any tax.

    I tried to find an answer to this question from my SIPP website (Barclays AJ Bell) but I can't find anything. I am now worried as I was planning on taking my maximum tax free sum this year and then to take draw-down amounts to keep under my tax free allowance each year going forward.
Page 1
    • robber2
    • By robber2 12th Oct 17, 1:13 PM
    • 257 Posts
    • 210 Thanks
    robber2
    • #2
    • 12th Oct 17, 1:13 PM
    • #2
    • 12th Oct 17, 1:13 PM
    Your understanding is correct and is confirmed in the FAQs of HL.

    http://www.hl.co.uk/pensions/drawdown/faqs

    Rob
    • dunstonh
    • By dunstonh 12th Oct 17, 2:11 PM
    • 89,852 Posts
    • 55,457 Thanks
    dunstonh
    • #3
    • 12th Oct 17, 2:11 PM
    • #3
    • 12th Oct 17, 2:11 PM
    There is a general rule of thumb that someone will forget around 70% of what you tell them within a very short period. She probably took some bits in but forgot the rest.

    There is no 25% income tax band.
    • zagfles
    • By zagfles 12th Oct 17, 2:56 PM
    • 12,365 Posts
    • 10,367 Thanks
    zagfles
    • #4
    • 12th Oct 17, 2:56 PM
    • #4
    • 12th Oct 17, 2:56 PM
    Pensions are taxed the same as earned income (except no NI). So yes you can use your personal allowance if you have any spare and the basic rate of tax is 20%. So either she misunderstood or the financial adviser doesn't know what they're taking about.
    • hullfiona
    • By hullfiona 12th Oct 17, 3:09 PM
    • 16 Posts
    • 7 Thanks
    hullfiona
    • #5
    • 12th Oct 17, 3:09 PM
    • #5
    • 12th Oct 17, 3:09 PM
    There is a general rule of thumb that someone will forget around 70% of what you tell them within a very short period. She probably took some bits in but forgot the rest..
    Originally posted by dunstonh
    I think this is the case, she hates finance and probably a bit stressed by the whole thing.
    • hullfiona
    • By hullfiona 12th Oct 17, 3:11 PM
    • 16 Posts
    • 7 Thanks
    hullfiona
    • #6
    • 12th Oct 17, 3:11 PM
    • #6
    • 12th Oct 17, 3:11 PM
    As a follow up I have found something that implies that Barclays/AJ Bell will take off income tax before paying drawdown payments, Is this normal practice it so means I will have to reclaim it later.
    • Linton
    • By Linton 12th Oct 17, 3:32 PM
    • 8,359 Posts
    • 8,256 Thanks
    Linton
    • #7
    • 12th Oct 17, 3:32 PM
    • #7
    • 12th Oct 17, 3:32 PM
    As a follow up I have found something that implies that Barclays/AJ Bell will take off income tax before paying drawdown payments, Is this normal practice it so means I will have to reclaim it later.
    Originally posted by hullfiona
    All drawdown payments other than the TFLS go through PAYE in exactly the same way as payments from employment. So as soon as HMRC are aware of your new "employment" they will issue a tax code. They only become aware once the first payment has been made. Therefore the pension company must use some default emergency taxcode for that first payment. This will usually result in excess tax being deducted.

    This excess tax will be repaid automatically by PAYE in your next drawdown in the current tax year once HMRC have supplied the tax code to the pension company. However if there are no other drawdown payments in that tax year you will need to claim back the tax yourself or wait until after tax year end. See https://www.gov.uk/claim-tax-refund/you-get-a-pension
    • AnotherJoe
    • By AnotherJoe 12th Oct 17, 4:11 PM
    • 7,394 Posts
    • 7,933 Thanks
    AnotherJoe
    • #8
    • 12th Oct 17, 4:11 PM
    • #8
    • 12th Oct 17, 4:11 PM
    There is a general rule of thumb that someone will forget around 70% of what you tell them within a very short period. She probably took some bits in but forgot the rest.

    There is no 25% income tax band.
    Originally posted by dunstonh
    Sorry dunstonh, what did you say? Something about thumbs?

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