BR M1 Tax Code

nxdmsandkaskdjaqd

This year I took, for the first time, from my SIPP (approx £4000 - £1000 tax free) to take me to just under my personal allowance (I do receive state pension). I have received a message from my SIPP provider saying that my Tax Code is now BR M1.  I have no other income.

I understand that the BR code will mean that I will pay tax at the Basic Rate of 20% on all of my income.  

This doesn't seem right, could somebody help with an explainantion?

molerat

How have you dealt with the tax that was deducted from that SIPP withdrawal ?  If you have SP + SIPP withdrawal which takes you to your personal allowance then all other income is taxable at BR anyway. Using M1 will stop the previous withdrawal being taken into account and causing problems.

nxdmsandkaskdjaqd

Yes there was £266 deducted in tax, which I have applied for a tax refund.  Which I am still waiting on.

molerat

What is your total income for the year - SP for whole year + taxable SIPP so far?

If it is below your allowance and you take more from the SIPP then it is possible that your tax will not be quite right and will need correcting at end of year but if you don't intend to take any more then the code is irrelevant.

Dazed_and_C0nfused

nxdmsandkaskdjaqd said:

This year I took, for the first time, from my SIPP (approx £4000 - £1000 tax free) to take me to just under my personal allowance (I do receive state pension). I have received a message from my SIPP provider saying that my Tax Code is now BR M1.  I have no other income.

I understand that the BR code will mean that I will pay tax at the Basic Rate of 20% on all of my income.  

This doesn't seem right, could somebody help with an explainantion?

A BR code is never used on what HMRC would consider your main PAYE source (State Pension isn't PAYE for this purpose).

So you need to establish what they think your main source is and if it no longer applies you can have the SIPP provider made your main source and a new tax code calculated.

nxdmsandkaskdjaqd

Thank you. So income for the year:

State pension £9420.32
SIPP drawdown £4000 (£3000 taxable - £1000 tax free
Personal allowance £12570 

molerat

Are you intending to take any more taxable income from any source this tax year ?  That is the deciding factor on whether you need to do anything about the tax code or not.  As it stands you have £150 remaining of your allowance.

nxdmsandkaskdjaqd

molerat said:

Are you intending to take any more taxable income from any source this tax year ?  That is the deciding factor on whether you need to do anything about the tax code or not.  As it stands you have £150 remaining of your allowance.

No more taxable income this year.

dunstonh

The first payment through payroll (i.e. from the 75% element) gets taxed using month 1 BR code.  By the time of the second payment, HMRC will have notified the pension provider of the correct tax code to use and future payments in the tax year will correct the amount of tax taken.

If you intend taking no more income in the tax year then you will need to complete the appropriate HMRC form.

molerat

dunstonh said:

The first payment through payroll (i.e. from the 75% element) gets taxed using month 1 BR code.  By the time of the second payment, HMRC will have notified the pension provider of the correct tax code to use and future payments in the tax year will correct the amount of tax taken.

Surely 1257LM1 but totally confused as OP said they paid £266 tax which is not the correct amount for either 1257LM1 or BR which would have been £390.20 or £600.

If you intend taking no more income in the tax year then you will need to complete the appropriate HMRC form

OP states that is in hand

nxdmsandkaskdjaqd

molerat said:

Surely 1257LM1 but totally confused as OP said they paid £266 tax which is not the correct amount for either 1257LM1 or BR which would have been £390.20 or £600.

Yes I agree the amount of tax paid is incorrect.  However, I should have paid no tax, and will do once this all gets sorted.