Are SIPP drawdowns taxed at source?

itm2

I'm planning to commence my (Hargreaves Lansdown) SIPP drawdown in a couple of years. The amounts involved (less than £7k per annum) mean that I won't be eligible for income tax, as I will have no other taxable income. My question is: can I expect the drawdown amounts to be paid gross, or will they be taxed at source, requiring me to reclaim tax after the end of the tax year?

Linton

Taxed at source just like PAYE. So you will have to reclaim tax, or ensure that HMRC set your tax code to include the allowance.

not-so-civil

I assume that you will also get the state pension. This is added to your Drawdown Pension which will take you over the threshold and H&L will deduct tax at source. You should however be able to claim back any excess payments.

itm2

not-so-civil wrote: »

I assume that you will also get the state pension. This is added to your Drawdown Pension which will take you over the threshold and H&L will deduct tax at source. You should however be able to claim back any excess payments.

No I'll be taking the SIPP from age 55, so will have another 12 years before the state pension arrives.

Has anyone ever managed to get HMRC to agree to a revised tax code so that the drawdown can be taken without tax deductions?

jem16

itm2 wrote: »

Has anyone ever managed to get HMRC to agree to a revised tax code so that the drawdown can be taken without tax deductions?

If this is your only income, your personal allowance will be attached to this so there should be no issue.

itm2

jem16 wrote: »

If this is your only income, your personal allowance will be attached to this so there should be no issue.

What I wanted to know was how/whether I could make HMRC/Hargreaves Lansdown aware of the fact that this was my only income, so that I could avoid basic rate tax being deducted and needing to be reclaimed.

jem16

itm2 wrote: »

What I wanted to know was how/whether I could make HMRC/Hargreaves Lansdown aware of the fact that this was my only income, so that I could avoid basic rate tax being deducted and needing to be reclaimed.

Are you finishing work at the same time as starting drawdown? If so send your P45 to HL.

jamesd

Just tell HMRC your anticipated income for the tax year. They will tell HL your tax code and that tax code will cause all of the drawdown income to be paid free of income tax because it'll be less than your personal allowance.

This works just as it does for an employee on say £5,000 of pay evenly spread over a year, no tax deducted because their income never uses up their personal allowance.

There might be some additional adjustment to the tax code to take care of any remaining errors in tax take while you were working or to allow for savings interest, say.