Moving tax allowance to a new pension provider after drawdown - how easy with HMRC?

Melvinsmum58

I took early retirement last year, I am considering moving 16k of my HL SIPP into drawdown this year, taking 4K as a tax free lump sum, and then 1k a month income.

I don’t have any other income, so tax-wise, it will be straightforward, with HL having my full tax allowance for this year.

I intend drawing on a DB pension in the 23/24 tax year and will top this up from my ISA, so will not be taking any drawdown income and will want my tax allowance to transfer to the DB provider. 

HL have confirmed that they will send me a P60 once my drawdown pot is empty, but will ‘hold onto’ my tax allowance, as I will still have money in my SIPP which could be paid out (but likely to remain uncrystallised and be passed on when I die). 

I assume that I will need to ask HMRC to make my DB provider my ‘Primary employer’ from 23/24 tax year onwards, so they can use my allowance.

Is it straightforward (can it be done online?), or even easier, will they do it automatically when they see that HL are no longer paying me an income after next April.

Flugelhorn

In the past I  have had multiple employers and HMRC tended to put the tax allowance against the highest paid - even when this was my NHS pension, the other employers just got BR or D0 codings.
I was trying to remember how it happened .. I think the latter bit of the tax year where I took my pension was carried on with next highest payer having all the tax allowance and then come April it switched to the NHS pension - I don't think I had to do anything specific (other than do a self assessment later as there were some expenses and other bits unaccounted for - but the codes were sorted before that was done.

Marcon

Melvinsmum58 said:

I took early retirement last year, I am considering moving 16k of my HL SIPP into drawdown this year, taking 4K as a tax free lump sum, and then 1k a month income.

I don’t have any other income, so tax-wise, it will be straightforward, with HL having my full tax allowance for this year.

I intend drawing on a DB pension in the 23/24 tax year and will top this up from my ISA, so will not be taking any drawdown income and will want my tax allowance to transfer to the DB provider. 

HL have confirmed that they will send me a P60 once my drawdown pot is empty, but will ‘hold onto’ my tax allowance, as I will still have money in my SIPP which could be paid out (but likely to remain uncrystallised and be passed on when I die). 

I assume that I will need to ask HMRC to make my DB provider my ‘Primary employer’ from 23/24 tax year onwards, so they can use my allowance.

Is it straightforward (can it be done online?), or even easier, will they do it automatically when they see that HL are no longer paying me an income after next April.

Through your personal tax account: https://www.gov.uk/check-income-tax-current-year

Melvinsmum58

Thanks for the link Marcon, I can see how I would potentially change figures, but how accurate is it? It is currently showing me with a non-coded income of just over £1k (I am assuming this is interest, but mine is likely to be a couple of hundred max!) and estimated tax of £5k. Any other ideas what non-coded income is?

Where on earth does the estimated tax figure come from, when I have not earned a penny since end of April last year?!

Melvinsmum58

Mmm, I think the tax is how much I would pay if still employed, but I haven’t been for almost a year. They know that, as they had my P45 and gave me a tax refund for 21/22 year back in September!

This is why I don’t trust being able to tell them through that link, about my SIPP drawdown stopping?

Dazed_and_C0nfused

Melvinsmum58 said:

Thanks for the link Marcon, I can see how I would potentially change figures, but how accurate is it? It is currently showing me with a non-coded income of just over £1k (I am assuming this is interest, but mine is likely to be a couple of hundred max!) and estimated tax of £5k. Any other ideas what non-coded income is?

Where on earth does the estimated tax figure come from, when I have not earned a penny since end of April last year?!

Have you ever completed a Self Assessment return?

The estimated tax will be based on the calculation done to arrive at your current tax code.  It doesn't really mean anything as what actually happens is what's important, not a calculation done before the tax year even starts.

Once your new pension starts to be paid and the pension company have reported the first payment via the Real Time Information system you can then update things.  There is nothing you can do now about a hypothetical future source of income.

The first payment will normally have the emergency tax code of 1257L so no tax will be deducted unless it exceeds £1,048.

Melvinsmum58

Only ever done one SA, and that was about 6yrs ago due to some CGT. Not done one since as have been an employee on PAYE.

I can see why they have calculated some estimated tax for this year - they list employments ended since 5/4/22 (ie Tuesday of this week) and include my employment that finished 30/4/21!

Oh dear…

Dazed_and_C0nfused

Non coded income will relate to something you declared on your Self Assessment return.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye130035

Its aim is to keep your tax code as accurate as possible but for most people it makes no difference.

Melvinsmum58

Ok, but other than the CGT and PAYE earnings, the only income I have ever had is interest. It may have been that figure when I did my SA, but has dropped steadily since. 

Does the non-coded income get taken off the PA figure? I thought it did?