A Basic question about SIPPs and tax

C_Mababejive

I have a SIPP.

My plan when i eventually take money from it is to take a single payment annually.

I understand that 25% of this will be tax free? Will that be handled by the SIPP provider or will i have to mess around with SA?

In every subsequent year when i take a payment, will each subsequent years payment also be 25% tax free and handled in the same manner?

Thanks all

SonOf

Provider handles the 25% tax free. You do nothing. Same on repeat draws.

MallyGirl

just be aware that you may be hit with emergency tax that you will have to claim back. If you make a single withdrawal at the beginning of the tax year they might assume that you are going to make the same withdrawal every month unless you tell them in advance what your plans are. Alternatively you could make the single withdrawal at the end of the tax year.

xylophone

Do you mean UFPLS?

https://adviser.royallondon.com/technical-central/pensions/benefit-options/ufpls-explained/

squirrelpie

just be aware that you may be hit with emergency tax that you will have to claim back. If you make a single withdrawal at the beginning of the tax year they might assume that you are going to make the same withdrawal every month unless you tell them in advance what your plans are. Alternatively you could make the single withdrawal at the end of the tax year.

Taking it at the end of the year makes no difference to the emergency tax calculation. They still multiply it by 12 to get the expected annual income and tax you on that basis. It's crazy cuckoo!


You need to ensure the pension provider has been given a tax code for you. The traditional way to do that is to take a small payment first, after which HMRC will issue the tax code and you can take a regular payment of the size you want.


This assumes that you are talking about UFPLS as xylophone suggests. All payments include 25% tax free and the pension provider works out the tax using your tax code and the PAYE tables.

xylophone

You need to ensure the pension provider has been given a tax code for you. The traditional way to do that is to take a small payment first, after which HMRC will issue the tax code and you can take a regular payment of the size you want.

Emergency tax could still be taken.

See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/ufpls/

It is however, very likely that emergency tax will be applied to the payments from UFPLS. Scheme administrators may apply emergency tax in respect of all UFPLS payments, even if a tax-code is held, as such, it is important to check the tax situation with the scheme administrator prior to drawing an UFPLS.

AnotherJoe

Taxwise it will be much easier to take monthly. What's the rationale for once a year?

tempus_fugit

I've taken a UFPLS in the past three years and each time I have been taxed on 75% of the withdrawal. I have been able to successfully claim this back though within a few weeks. OH was taxed in the first year but not since then, I assume I have been taxed because I have historically had other pension payments during the year as well (but always within the personal allowance), whereas OH has not. So, you may have tax deducted in future years or you might not.

BoxerfanUK

AnotherJoe wrote: »

Taxwise it will be much easier to take monthly. What's the rationale for once a year?

Possibly withdrawal charges.

C_Mababejive

BoxerfanUK wrote: »

Possibly withdrawal charges.

This and also the fact that i will have other pension income so the SIPP would be just a top up and the amount would likely be variable.


When i first started dabbling in SA and similar i thought the system would run like clockwork and be logical/sensible. How wrong could i be. Its a mess.