Drawdown tax issues

Jmac64

Hi I need to start drawdown from my chrystallized pension in April and want to avoid paying emergency tax and having to claim it or wait for to be paid back. I intend to keep my total income around the £12500 personal allowance. I’m allowed 6 withdrawals a year with Aviva. Any advice welcomed thanks. James.

BoGoF

Do you mean after 6 April, i.e. 20/21 tax year?

If so, you are in month 1 of the tax year so it won't really matter if the code is cumulative or non-cumulative, the tax will be the same.

Jmac64

Thanks for reply. My income from miners pension is only £8k pa and need to top up with drawdown from my other pension to make total income £12500 to try and avoid tax or being taxed and having to wait for it back. Not sure how much and when to request drawdown payments. Shall I request the £4500 in one go or use the six permitted withdrawals a year to make it better for tax reasons ? Sorry but tried two financial advisors but they just want me to move my pot to their company before any advice given ����. Hope I made sense lol. Thanks.

xylophone

Why only six withdrawals a year?

Can you not have a regular £375 a month?

Have you reached state pension age? If so, are you drawing a state pension?

If not, have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Dazed_and_confused

and want to avoid paying emergency tax and having to claim it or wait for to be paid back.

If this is the first payment from your Aviva pension then the emergency tax code of 1250L will be used on a non cumulative basis.

You need to ensure the taxable withdrawal is no more than £1042 otherwise tax will be deducted.

This assumes you are taking the payment in the current tax year. If it is going to be in the 2020:21 tax year then you will need to wait for the Budget as the Personal Allowance has not yet been announced for 2020:21. Although chances are you could still take £1,042 as the first withdrawal and have no tax deducted. But it could well be more than £1,042 in 2020:21 but only the Chancellor knows this at the moment.

Hi I need to start drawdown from my chrystallized pension in April

unholyangel

Dazed_and_confused wrote: »

If this is the first payment from your Aviva pension then the emergency tax code of 1250L will be used on a non cumulative basis.

You need to ensure the taxable withdrawal is no more than £1042 otherwise tax will be deducted.

This assumes you are taking the payment in the current tax year. If it is going to be in the 2020:21 tax year then you will need to wait for the Budget as the Personal Allowance has not yet been announced for 2020:21. Although chances are you could still take £1,042 as the first withdrawal and have no tax deducted. But it could well be more than £1,042 in 2020:21 but only the Chancellor knows this at the moment.

Wouldn't that potentially create an underpayment (and reduce the tax free allowance available for the remainder of the year) due to the other pension? For the 20-21 year at least, wouldn't cause the same issue this year. Although due to timings, there is the potential for there not to be enough time for HMRCs system to pick up on it and issue new cumulative codes.

If done in april, would it possibly be better to withdraw just the 375 each month or wait till month 2 and do a draw every 2 months of 750?

Also OP....have you taken any of the 25% yet? You're trying to bridge an income gap while avoiding paying any tax then that may be another option/function worth considering the effects of.

Jmac64

No not reached state pension age yet that’s why my miners pension needs topping up with aviva one. Aviva said only 6 withdrawals a year dunno why.

Jmac64

Hi yeah I’ve taken the 25% tax free.

Dazed_and_confused

If it was before 6 April 2020 then no tax would be deducted and there would be no tax owed (assuming the £8k miners pension in the only other taxable income the op has).

If it was after 5 April 2020 then no tax tax would be deducted and new tax codes for 2020/21 would be calculated.

Which may well be 800L for the miners pension and 450T for the Aviva Pension.

jimmo

Dazed_and_confused wrote: »

If this is the first payment from your Aviva pension then the emergency tax code of 1250L will be used on a non cumulative basis.

Are you sure about that?
In theory at least, Aviva should invite the OP to complete a starter checklist and, when they declare that they have another pension, operate code BR.

unholyangel

Dazed_and_confused wrote: »

If it was before 6 April 2020 then no tax would be deducted and there would be no tax owed (assuming the £8k miners pension in the only other taxable income the op has).

If it was after 5 April 2020 then no tax tax would be deducted and new tax codes for 2020/21 would be calculated.

Which may well be 800L for the miners pension and 450T for the Aviva Pension.

If that was in response to me (not being rude, just unsure)...

If they are receiving £667~ from their miners pension in m1 and draw £1042 from the other....that creates a theoretical underpayment of £133~, which would normally trigger an adjustment to the tax code - particularly if its after the very first payment received from a new source.