SIPP and Dividend Tax

Username999

Say my SIPP produces £12,000 worth of dividends from UK shares.

And I have used up my personal allowance of £12,500.

How would the £12k dividends be taxed if I withdraw it from a SIPP?

Is the dividend allowance of £2,000 used and the remaining £10k taxed at 7.5%.

Assume I am a basic rate tax payer.

Thanks.

Dox

You can't specifically withdraw dividends from your SIPP; you would simply withdraw funds from your SIPP. Up to 25% of the value of your SIPP is tax free, the balance of any withdrawal is taxed at your marginal rate. You could decide that the whole £12K is being taken tax free (assuming your SIPP is currently worth at least £48K and you've not yet taken any tax free cash); or that part of the £12K is tax free with the balance being taxable at basic rate. Beware doing the latter, since you will trigger the Money Purchase Annual Allowance and limit yourself to contributions of no more than £4K (gross) going forwards.

SonOf

How would the £12k dividends be taxed if I withdraw it from a SIPP?

As income.

Is the dividend allowance of £2,000 used and the remaining £10k taxed at 7.5%.

No. Your investments are within a tax wrapper and not subject to the same taxation as unwrapped holdings.

Username999

Ok thanks all.

Going forward does this mean I DO NOT have to mention 'dividend income' on my Self Assessment Form?

Albermarle

I DO NOT have to mention 'dividend income' on my Self Assessment Form?

Correct as long as the investments are within a SIPP ( or ISA)

Linton

Username999 wrote: »

Ok thanks all.

Going forward does this mean I DO NOT have to mention 'dividend income' on my Self Assessment Form?

Whatever happens within your SIPP must not be included in your self assessment form. Your SIPP is a different person to you and the two must not be confused.

SonOf

Going forward does this mean I DO NOT have to mention 'dividend income' on my Self Assessment Form?

You only mention dividends if you hold unwrapped investments. When you hold investments in a tax wrapper (typically ISA, pension, onshore/offshore investment bond) then your investments are subject to the rules of the tax wrapper.