Drawdown Regular Income

zagfles

coyrls said:

zagfles said:

coyrls said:

zagfles said:

coyrls said:

Sea_Shell said:

coyrls said:

Sea_Shell said:

coyrls said:

sheslookinhot said:

Or sell a years worth of funds to meet your income requirements but drawdown monthly.

The advantage of an annual withdrawal is that you can keep your cash in a savings account and earn interest over the year.  There is typically no interest paid on cash in a SIPP.  It an easy monthly task to move cash from a savings account to a current account.

One then does have to do battle with HMRC to get excess tax refunded!!

Not in my experience.  I make one withdrawal in March each year and the correct tax is deducted and so there is no need for an excess tax refund.

So at the end of a tax year, rather than the beginning, so not a "month1" calculation?   Is that the "trick"?

Having drawn out a taxable lump (within PA) sum in September, the rebate took until April to be refunded.

My understanding is that once you have a tax code issued, the "month 1" calculation is not applied, regardless of the month in which you take the withdrawal.  In the same way, if you are on an emergency tax code, the "month 1" calculation is applied regardless of the month in which you take the withdrawal.

I chose March as my withdrawal month, as it means I can submit a tax return to get any tax errors sorted out ASAP, although as I said there have been no errors so far.

Yes once you have a cumulative code, your tax free amount in PAYE for the year so far is m/12 * [tax code with a 9 on the end] where m is the tax month. So on a 1257L code, payment in late May (month 2) the allowance would be 2/12 * 12579 = £2096.50. So if your drawdown in May plus April is under £2096 there's no tax. If it's more then you're taxed on the total minus £2096.50. But if it's then less later in the year you'd get a tax refund via PAYE.

For instance, if you draw £1000 in April, you'd pay no tax.

If you then draw £2000 in May, you'd pay tax on (3000-2096.50) = £903 (taxed on whole pounds only) so pay £180.60

If you then draw £1000 in June, you'd pay tax on  (4000-3144.75) = £855, so total tax = £171, £180.60 already paid so you'd get a tax refund of £9.60

If you draw just £100 in July, you'd get the rest of the tax paid (£171) refunded since your total to date is £4100 and the allowance to date is £4193.

Or you can cheat and use a PAYE calculator eg http://payecalculator.hmrc.gov.uk/PAYE0.aspx

More complicated than I thought.  So, taking a single withdrawal in March works for me as I get 12/12 of my tax free amount whereas if I made a single withdrawal in April I would only get 1/12 of my tax free amount and have to claim a tax refund the following April.

You could just make a token drawdown later in the year and it'll be refunded then. For instance if you draw £12,000 in April, you'd pay loads in tax as you'd be way into higher rate. But if you drew £100 the next March, you'd get it all back then. Or if you wanted some back earlier, do token drawdown(s) earlier.

Some providers might even run "payroll" if you have a zero drawdown and refund even if you don't drawdown but not sure about that...

Easier to stick to March, it works for me.  When I make my request it is for a one off withdrawal, which can be taken on any date.  Monthly withdrawals have to be taken on a specific day of the month and presumably that day is set by a "payroll" run, so I infer from that that a one off withdrawal would not be part of any "payroll" run and so wouldn't get a subsequent automatic tax refund.

Should do for any PAYE payment. I think most providers only bother running "payroll" once a month but any that operate PAYE should work the same. But if you're happy with annual withdrawals in March that'll be easiest.

older_and_no_wiser

That's why I like Interactive Investor. Their monthly fee for the SIPP (£9.99) is taken by direct debit from my current account. 

coyrls

The discussion was about cash for withdrawals, not cash for fee payments, however I prefer my fee to be taken from untaxed cash in my SIPP.

NedS

coyrls said:

The discussion was about cash for withdrawals, not cash for fee payments, however I prefer my fee to be taken from untaxed cash in my SIPP.

Agreed, seems silly to pay fees out of taxed net income, unless you are confident that you will later be able to liquidate the whole SIPP tax free then it makes no difference. But generally, it is more efficient to pay fees out of cash held within the SIPP

dc19

I currently take the full allowance in April and claim tax back through a P55 form.  Last year got tax back around 6 weeks later. Only do this so as to get the cash into a better interest paying product and then transfer monthly from savings to current acc. each month as suggested by other poster.
Some good info on here though on how I could maybe manage this better to save having to pay the tax and then reclaim. Thanks