Tax efficient draw-down from SIPP

MGBRoadstar

I made a net loss of approx £8,000 from self-employment in 2014-15 with no other income.

I want to draw down some funds from a SIPP during 2015-16. I understand that I can choose to have 25% of this tax free, with the remainder taxable.

Two questions:

1. Can I use the 2014-15 loss to offset the taxable part of the drawdown?

2. If so how do I calculate the maximum amount I can draw down without paying any tax? (assuming I make a small profit of £4,000 in 2015-16)


Thanks for any help.

[Deleted User]

1) No - you can set the loss against other income in the year 2014/15 (or earlier). If you wish to carry the loss forward it can only be used against future profits from THE SAME TRADE.

2) I have a fair idea but would not be 100% certain that I would be correct. (All this pension malarkey came in after I retired).Others on here can, and will, help.

xylophone

Assuming your only income for 2015-16 is £4000, then you would deduct that amount from your personal allowance and the balance would be what you could take tax free from the SIPP for that year, on top of the tax free PCLS.

However, the pension company would probably tax the income portion on a month 1 basis so you would need to reclaim.

http://www.hl.co.uk/pensions/drawdown/how-does-it-work

https://www.gov.uk/government/publications/flexibly-accessed-pension-payment-repayment-claim-tax-year-2015-2016-p55

MGBRoadstar

Thanks guys

sheramber

xylophone wrote: »

Assuming your only income for 2015-16 is £4000, then you would deduct that amount from your personal allowance and the balance would be what you could take tax free from the SIPP for that year, on top of the tax free PCLS.

However, the pension company would probably tax the income portion on a month 1 basis so you would need to reclaim.

http://www.hl.co.uk/pensions/drawdown/how-does-it-work

https://www.gov.uk/government/publications/flexibly-accessed-pension-payment-repayment-claim-tax-year-2015-2016-p55

If the £4000 profit is from the same trade can he not set off the losses carried forward against it leaving all his personal allowance available against his pension income?

xylophone

If the £4000 profit is from the same trade can he not set off the losses carried forward against it leaving all his personal allowance available against his pension income?

I don't know- he'd have to check with HMRC.

[Deleted User]

sheramber wrote: »

If the £4000 profit is from the same trade can he not set off the losses carried forward against it leaving all his personal allowance available against his pension income?

Yes - if not previously utilised against other income the losses MUST be carried forward against the £4000 - leaving the full personal allowance available.