Drawdown and tax

cromercrab

Hi,

I have a standard life drawdown pension. I released the 25% tax free lump sum two years ago and want to take a further 20k now.

I am 58, self employed and was thinking that I could just request the monies and treat it as income in this tax year.

My financial adviser informs me that I have to pay tax at source, is StdLf will remove the tax based on an emergency coding and then I reclaim the tax at the end of this financial year.

Is there any way, either in writing or form to get Stdlf to release the full monies and then I pay tax at the end of the year on the taxable amount.

Hope this makes sense.

Best.

xylophone

See http://adviser.royallondon.com/technical-central/pensions/benefit-options/emergency-tax-and-lump-sum-withdrawals/

re in year tax reclaim.

Dazed_and_confused

Basically no, even if you made a repayment claim to HMRC i cannot imagine they would repay all of the tax if you took out 20k.

Logically the best you could hope for is surely that they worked out how much tax would be due on 20k and repaid the difference to you.

I wouldn't be expecting every penny of tax deducted by standard life to be repaid.

maximumgardener

perhaps you could take the money out more gradually (monthly) . ?
pension income is taxed on way out, so you will pay tax on it......an other option could be to source your 20k from elsewhere e.g. ISA funds

cromercrab

Thanks for response, appreciated. My self employed income has been stable around the tax free limit (10-12k) for the last 5/6 years, so I may have a discussion with HMRC, not expecting a quick or satisfactory ending. And the plan B, well I don't intend to take out such an amount on an annual basis but probably 10k which I may look at the monthly payment option, which I understand if its less than the 11.5k ÷12 will not require tax at source.

Dazed_and_confused

Don't forget though if your business profits have been at that level you won't have been having to pay much tax under self assessment, certainly not last year or two, but if you do this with your pension you will have a much higher self assessment liability.

Not any worse overall but you will be having to pay more through self assessment as you won't have spare personal allowances to utilise against your profits

Dazed_and_confused

What are you hoping to achieve by contacting HMRC? Even if you have the best possible tax code in place (1150L?) for 2017:18 standard life would have to deduct tax on a 20k payment.