Tax Question on SIPP Drawdown

jim8888

Come April and the new tax year, I'm going to drawdown £12,570 out of my Interactive SIPP account. I've already fully crystallised this pension and taken out the 25% TFLS. My understanding is that when I withdraw this sum, although it's within my personal tax allowance for the year to come, I'll still be taxed on it and will have to claim the tax back via a form?
Is that correct?

molerat

Are you going to take it all in one lump sum ?

Unless you have a tax code set against the pension the first withdrawal will be taxed at 1257LM1and the tax will need reclaiming. HMRC will then issue a tax code for future withdrawals.  If you make a small withdrawal below  £1048 no tax will be deducted. Once the code is allocated you can then phase your withdrawals so that you do not exceed your tax allowance.

Where is your tax allowance currently allocated, what other income do you have ?

Dazed_and_C0nfused

Yes and no.

The emergency tax code (1257L) will be used on the first payment on a non cumulative basis.

You can claim tax back if you want but if you do nothing any overpaid tax will eventually be automatically refunded by HMRC.

https://www.gov.uk/tax-overpayments-and-underpayments

jim8888

molerat said:

Are you going to take it all in one lump sum ?

Unless you have a tax code set against the pension the first withdrawal will be taxed at 1257LM1and the tax will need reclaiming. HMRC will then issue a tax code for future withdrawals.  If you make a small withdrawal below  £1048 no tax will be deducted. Once the code is allocated you can then phase your withdrawals so that you do not exceed your tax allowance.

Where is your tax allowance currently allocated, what other income do you have ?

I was planning to take the £12,570 in one lump sum, pay on the emergency code and then claim it back.
This will be my only income in 2022/23 (unless I take a job!) Any other income will be from TFLS and ISA savings. (I also haven't earned any income in 2021/22, aside from a redundancy payment in April last year, which I paid the relevant tax on at the time.)

sheslookinhot

I’m dong the same in May. Take the 25% tax free lump sum and a drawdown of £1,100 per month.

squirrelpie

jim8888 said:

I was planning to take the £12,570 in one lump sum, pay on the emergency code and then claim it back.

As has already been mentioned, if you take a small payment first it will cause a tax code to be issued for that pension (probably within a few weeks) and you can then take the balance of the money you want without having to claim back tax. Depending on your platform multiple payments may be free or may cost extra.

jim8888

squirrelpie said:

jim8888 said:

I was planning to take the £12,570 in one lump sum, pay on the emergency code and then claim it back.

As has already been mentioned, if you take a small payment first it will cause a tax code to be issued for that pension (probably within a few weeks) and you can then take the balance of the money you want without having to claim back tax. Depending on your platform multiple payments may be free or may cost extra.

I think that might be what I do, thanks.

NSG666

For info only:
Last April my wife and I each took a UFPLS from our SIPPs and were deducted a large % of emergency tax. The UFPLS was paid into our account mid May and I'd have submitted tax refund requests to HMRC pretty soon afterwards. These were processed and paid out by the end of July - so a couple of moths to get the tax back in my experience but that will probably vary.

One request each to the SIPP provider and one request each to HMRC done and dusted.