Sipp Drawdown . Taxed while on universal credit

another_casualty

Howdy ! 

I hope that you can advise on the above . 

I have signed onto universal credit jan2019. First payment March 2019

In December 2019 I withdrew less than £6k . A straightforward withdrawal from my sipp.
Universal credit asked why and I told them the truth that I wanted to clear credit card and overdraft . No more questions asked.

On 28th of December this year  ( a year later) I took another drawdown . 

However , this was taxed and I was given tax code1250L. M1 I was also given a PAYE code . They said that if there are any problems to contact Hmrc in Liverpool.I'm scratching my head, and sent a polite email.
This morning I received an email with new tax code 1244L  m1 
The question I have is , will I be refunded ? Will I get taxed every time I withdraw from my drawdown sipp if I'm still unemployed ?
I expect to be unemployed for sometime , and be on universal credit for some time due to health issues . 

Thanks in advance , and happier new year also . 

Brynsam

another_casualty said:

Howdy ! 

I hope that you can advise on the above . 

I have signed onto universal credit jan2019. First payment March 2019

In December 2019 I withdrew less than £6k . A straightforward withdrawal from my sipp.
Universal credit asked why and I told them the truth that I wanted to clear credit card and overdraft . No more questions asked.

On 28th of December this year  ( a year later) I took another drawdown . 

However , this was taxed and I was given tax code1250L. M1 I was also given a PAYE code . They said that if there are any problems to contact Hmrc in Liverpool.I'm scratching my head, and sent a polite email.
This morning I received an email with new tax code 1244L  m1 
The question I have is , will I be refunded ? Will I get taxed every time I withdraw from my drawdown sipp if I'm still unemployed ?
I expect to be unemployed for sometime , and be on universal credit for some time due to health issues . 

Thanks in advance , and happier new year also . 

You'll be refunded if your total income in any tax year is less than the personal allowance for that year.

Whether you get taxed every time you withdraw cash from your SIPP will depend on the tax code your SIPP provider has at the time you drawdown. The SIPP provider can't change it - they must apply whatever code HMRC tells them to apply.

It may be worth making a small withdrawal at the start of the tax year 2021/22 and then waiting for HMRC to send a new tax code to your SIPP provider, which they will then use for your next drawdown - could save having a large chunk of tax taken and then waiting for a refund.

Dazed_and_C0nfused

Was the withdrawal in December 2019 just a TFLS?

From now on you you will pay tax if you take a taxable payment of more than £1037 in any month.

You may be due the tax back at a later date but that depends on your overall taxable income for the tax year in question.

You may be able get the tax code issued on a cumulative basis so that you only pay tax once you have been paid an amount exceeding an average of £1037 for each and every month of the tax year i.e. £10,374 by tax month 10 ending 5 February 2020.

If you don't intend taking any further taxable payments in this tax year then have a look at form P55 on gov.uk.

But if you don't bother with that and are due a refund HMRC will automatically refund any overpaid tax for 2020:21 sometime next summer.

another_casualty

Thanks very much for your swift help / advice. 

The plan I have / had was to withdraw once annually. Obviously less than £6k before universal credit start deducting and over complicating things. 

In my case it would seem once every 12 months would hopefully be sufficient and no questions asked . 

My initial thought was to just wait until may and then contact Hmrc then . 

What's TFLS? Sorry for being naive 

Dazed_and_C0nfused

Tax free lump sum

another_casualty

Dazed_and_C0nfused said:

Tax free lump sum

Ah, yes it was . 

Thanks 
As I have just taken a drawdown I don't want to touch anything till next December due to the strict guidelines by universal credit 

squirrelpie

What do you mean by 'withdraw' exactly? What type of withdrawal? Just TFLS or UFPLS or drawdown and if so what parameters?

another_casualty

Forgot to mention , I took £4,400 which had over £700 taxed . This took net payment of around£3,700

another_casualty

squirrelpie said:

What do you mean by 'withdraw' exactly? What type of withdrawal? Just TFLS or UFPLS or drawdown and if so what parameters?

Thanks for that.
Last year was a tax free lump sum. This withdrawal was my first drawdown withdrawal . 

Apologies again  but , what is UFPLS ? 

Dazed_and_C0nfused

another_casualty said:

squirrelpie said:

What do you mean by 'withdraw' exactly? What type of withdrawal? Just TFLS or UFPLS or drawdown and if so what parameters?

Thanks for that.
Last year was a tax free lump sum. This withdrawal was my first drawdown withdrawal . 

Apologies again  but , what is UFPLS ? 

So £5866 in total, £1466 TFLS and £4400 taxable income?

Uncrystallised funds pension lump sums.

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

another_casualty

Ah, just googled . It looks like I did take ufpls last year , as it was my first lump sum from my pension as I'm over 55. 

The withdrawal this month was sipp income drawdown . my first one .