Drawdown tax issues

unholyangel

jimmo wrote: »

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.

Unless you have a p45 from the current year, your pension provider is supposed to operate it on the emergency code basis.

The word supposed is key there. People don't always do what they're supposed to do. Particularly when it comes to tax.

Dazed_and_confused

jimmo, according to CWG2, Employers Further Guide to PAYE the pension company should take the following action

Pension recipient does not give you form P45
If a pension recipient does not give you a form P45:

set up a new payroll record for them
include the date the pension started with the first pension payment
indicate ‘Yes’ in the occupational pension indicator field on the first and every payment of pension
include the annual amount of the occupational pension with the first pension payment, do not pro rata it from the start date
include the tax code – unless you’re told to use a new tax code by HMRC, use the emergency tax code on a week 1 or month 1 basis
include the payroll ID, if you want to use one

Or

How to tax pension flexibility payments
To tax pension flexibility payments you must:

set up a new payroll record
treat the payment in the same way as other pension payments and operate PAYE in the normal way
tax 75% of the payment - 25% is tax-free
deduct on the taxable element using the emergency code on a week 1 or month 1 basis. If you already have a tax code for the current year from the previous individual’s P45, you should operate that code on a week 1 or month 1 basis

Dazed_and_confused

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.

For month 1 yes there would be an underpayment and yes that would normally trigger an adjustment to the tax code but across the year as a whole there is £4500 unused Personal Allowance from the miners pension.

The 450T tax code may well be on a non cumulative basis but depending on the timing and amounts of any subsequent withdrawals from Aviva the op could ask for this to be issued on a cumulative basis.

jimmo

Dazed_and_confused wrote: »

jimmo, according to CWG2, Employers Further Guide to PAYE the pension company should take the following action




Or

Thanks for that. Admittedly it was a long time ago but when I retired my first pension payment was taxed on code 0T month 1 but it worked out well because my final salary and first pension payment fell in the same tax month.
Then it was all sorted the next month with no input from me.
As I said, that suited me fine but clearly it would not suit the OP in their different circumstances.

Jmac64

So many different replies just got me more confused than before guys but thank you anyway

jimmo

Jmac64 wrote: »

So many different replies just got me more confused than before guys but thank you anyway

So many different replies, yes but only one person got it completely right.
Just concentrate on what Dazed and confused has said and ignore the rest of us.

unholyangel

Dazed_and_confused wrote: »

For month 1 yes there would be an underpayment and yes that would normally trigger an adjustment to the tax code but across the year as a whole there is £4500 unused Personal Allowance from the miners pension.

The 450T tax code may well be on a non cumulative basis but depending on the timing and amounts of any subsequent withdrawals from Aviva the op could ask for this to be issued on a cumulative basis.

What I was suggesting (poorly it seems ) is that the theoretical underpayment would mean there isn't 4500 of unused allowance. At least as far as the tax codes go (agree with you entirely about the year overall).

But I was trying to keep things as simple for the OP as possible. The only thing I'm unsure about, is whether the OP would need to wait till m3 or m4 (not sure if it considers whether there is a possibility of a payment in m3 if the month isn't over) before requesting cumulative codes. Meanwhile, OP would likely be paying a very small amount of tax if hmrc issued the reduced allowance codes.

So OP would have to calculate how much they could draw. If figures are bang on accurate (I'd guess they're approximate) then £85 if m3 and £461 if m4.

My suggestion of £750 in m2 (6th may onwards - for OP's benefit), would mean OP could draw same amount every 2 months so routine (less room for error with routine!). And less risk of OP needing to intervene as no underpayment so full allowance available. Income estimate should also be correct in this instance where 1042 draw in m1 would create an estimate of 12500.