Drawing dowm a HL drawdown and tax

ProDave

I have a small pension now in a HL drawdown SIPP since last March, when I drew the tax free 25% (I have other deferred pensions as well)

I am self employed and don't earn much. It is looking like this tax year I will be under the threshold for paying any tax at all.

I would like to draw a small amount from my drawdown fund. I often see mention of doing strange things to misimise the tax deducted. Any advice on that?

But my thinking is just draw what I want in February, regardless of what tax they might rightly or wrongly deduct from it. Then it will only be a few weeks until the end of the tax year. I can then fill in my self assesment and should get any over paid tax back quite quickly.

Is that how it works or what else do I need to know?

Dazed_and_confused

You are correct.

The emergency tax code will be used on the first payment so you can take up to about £988 without any tax being deducted.

But if tax is deducted and ultimately isn't due then you will get it back when you file your Self Assessment return.

ProDave

So of I draw £2K then only roughly £1K of that will have tax deducted?

Dazed_and_confused

On £2k there would be tax deducted of £202.20.

AnotherJoe

ProDave wrote: »

So of I draw £2K then only roughly £1K of that will have tax deducted?

Unless you are desperate for the £2k in one lump sum it might be better to withdraw the £988 or whatever it is in Feb and same again in March. Then no need to reclaim any tax.

squirrelpie

Take a small amount now (could well be £988, I haven't checked the figures). HL will report the payment to the taxman and the taxmen will then issue HL with a tax code to use in future, and send a copy to you. Once you and they get that, HL will deduct tax from any future payments. You can call HMRC to adjust the code if you think they've got it wrong, or if it takes a long while to come. HL need some time (I think it's about a week) to make a payment near the tax deadline so finish giving instructions to HL a few days before the end of March whatever you do.

ProDave

Thanks

I thought I read there was only 1 drawdown payment date each month, the 17th rings a bell. So if I miss that for March I would miss any more drawdown in this tax year. I want to get some out as I have this window of a small amount tax free due to this years low earnings. That's why I was aiming for the February drawdown payment day.

I am self employed and my earnings vary so it is hard to predict until close to the end of the year what I will earn, hence now taking stock and seeing what is effective to draw at a year end.

I am not desperate to spend the money so if I have to wait a few weeks for my tax return and a refund that is no big issue. I just want to do what is simple so one withdrawal sounds easy. The object is simply to get a bit out tax free to spend later.