Taking personal allowance from SIPP in P12 to avoid paying tax 14 January at 10:02AM in Pensions, annuities & retirement planning 7 replies 224 views

Scrudgy

Hi, can anyone confirm this please?

My wife wants to take her £12,570 personal allowance from her AJ Bell SIPP. She has had zero income for the entire 22/23 tax year so far. She will apply to take it in period 12 as a single lump sum.

Will she pay zero tax as it is her only income and she is taking it in March’s period 12?
or
Will tax be taken and we have to claim it back on a P55?

Many thanks if anyone can clear this up, can’t seem to find it on AJ Bell website. Previously we have done it earlier in the tax years and paid tax and reclaimed, but the reclaim has been taking longer and longer. We are hoping doing it in period 12 of the tax year may prevent the tax being deducted at all (hopefully)

squirrelpie

Scrudgy said:

Will she pay zero tax as it is her only income and she is taking it in March’s period 12?
or
Will tax be taken and we have to claim it back on a P55?

Which period she takes it makes no difference. If it is the first payment from that pension provider she will be taxed at so-called emergency rate and need to reclaim it. But if she's already taken a previous payment from that provider then they will have been issued with a tax code and will use that instead. So the best way to avoid emergency tax is to take a small payment first (less than £1080 IIRC) so HMRC will then issue a tax code to the provider and you can then take the main payment. You can discuss the tax code with HMRC after it has been issued if you think it is inappropriate.

Albermarle

You can not take taxable cash, without taking some 25% tax free first , Maybe though this has already been taken earlier ?

Scrudgy

Albermarle said:

You can not take taxable cash, without taking some 25% tax free first , Maybe though this has already been taken earlier ?

Yes, all the tax free cash has previously been taken. Everything left is taxable.

molerat

Scrudgy said:

Albermarle said:

You can not take taxable cash, without taking some 25% tax free first , Maybe though this has already been taken earlier ?

Yes, all the tax free cash has previously been taken. Everything left is taxable.

Is there a tax code already allocated to the pension ?

It should be shown somewhere in the on line platform or in her personal tax account.

Scrudgy

molerat said:

Scrudgy said:

Albermarle said:

You can not take taxable cash, without taking some 25% tax free first , Maybe though this has already been taken earlier ?

Yes, all the tax free cash has previously been taken. Everything left is taxable.

Is there a tax code already allocated to the pension ?

It should be shown somewhere in the on line platform or in her personal tax account.

Hi yes, standard personal allowance tax code of 1257L is allocated to my wife’s pension with AJ Bell.

molerat

In that case she will be able to take the full £12570 in M12 without any tax deducted.  In fact likely £12579.12 due to the way PAYE works.

Scrudgy

molerat said:

In that case she will be able to take the full £12570 in M12 without any tax deducted.  In fact likely £12579.12 due to the way PAYE works.

Great, thank you very much for this. 👍