Taking £1000 out of SIPP before new tax year

Mr_Countdown

Hi. Hopefully a quick question and answer. I have a cash SIPP with Hargreaves Lansdown which has about £3000 in it and I'm contributing £240 into it each month. I've never made a withdrawal as I'm only 55 in early March. 
If I took a £2500 withdrawal out before April 6th would I get put on emergency tax for it? For info I will have earned well below £12570 from rental income and a small part time job.
If the answer is still yes on the emergency tax then if I just took a sum of £1000 would this be low enough not to be taxed on it?
Hope that makes sense!

Dazed_and_C0nfused

Yes, code 1257L would be used, on a non cumulative basis.

So some tax on £2,500 and no tax on £1,000.

Are these amount inclusive of 25% TFLS i.e. £1,875 or £750 would be the taxable amounts rather than £2,500 and £1,000?

molerat

Emergency tax will deduct tax over £1048 taxable so a £1397 UFPLS could be taken. You will also be given a tax code for next year.  It will take about 2 weeks to get the cash so you will need to fill in the on line questionnaire on your birthday and get the necessary ID and bank paperwork ready to send off with the form when it arrives.

Marcon

Mr_Countdown said:

Hi. Hopefully a quick question and answer. I have a cash SIPP with Hargreaves Lansdown which has about £3000 in it and I'm contributing £240 into it each month. I've never made a withdrawal as I'm only 55 in early March. 
If I took a £2500 withdrawal out before April 6th would I get put on emergency tax for it? For info I will have earned well below £12570 from rental income and a small part time job.
If the answer is still yes on the emergency tax then if I just took a sum of £1000 would this be low enough not to be taxed on it?
Hope that makes sense!

The product provider has to apply an emergency tax code on your first withdrawal. You then apply for a refund of overpaid tax, either on your self assessment tax return or directly to HMRC.

You'll trigger the Money Purchase Annual Allowance, which will restrict you to annual maximum contributions of £4,000 (including tax relief) for all future tax years. That may not be a problem for you if you only plan to contribute at your current level, but if you might want to top up (and you are still only 54, so have another 20+ years to do so - your earnings/plans might change).

If you take the whole of your SIPP under the 'small pots' regime (you need to specify to the provider that's what you are doing), it won't trigger the MPAA - and you can just start another SIPP for future contributions. You'll still be taxed at the emergency rate; that's unavoidable, but again, you simply ask for a refund of overpaid tax from HMRC.

bunnygo

I'm just doing my first withdrawal as UFPLS which I THINK is what you mean - check with a pensions grownup! As someone else notes, this may be better under the 'small pots' scheme so you don't paint yourself into a corner.

please get some guidance.

Mr_Countdown

Many thanks for your replies and apologies for late replying but my phone is currently broken so using the library computer!

Macron I was planning on using the 'Small pots regime' to not trigger MPAA. Is there a limit to how many times I can withdraw from a pot with less than £10,000 in it?

If I was planning on taking 25% tax free on top of the £1000 so a total of £1250 would that trigger any tax on it?

Dazed_and_C0nfused

Mr_Countdown said:

Many thanks for your replies and apologies for late replying but my phone is currently broken so using the library computer!

Macron I was planning on using the 'Small pots regime' to not trigger MPAA. Is there a limit to how many times I can withdraw from a pot with less than £10,000 in it?

If I was planning on taking 25% tax free on top of the £1000 so a total of £1250 would that trigger any tax on it?

You can't do that.

Any TFLS would be 25% of the amount crystallized, not 20%.

So if that was £1,250 then £312.50 TFLS and £937.50 taxable.

Mr_Countdown

Thanks Dazed_and_Confused.
So as Molerat put in the 2nd comment above if I asked for £1397 UFPLS this would comprise £1048 plus the 25% tax free amount of £349 and I wouldn't pay any tax on this?

Linton

Mr_Countdown said:

Many thanks for your replies and apologies for late replying but my phone is currently broken so using the library computer!

Macron I was planning on using the 'Small pots regime' to not trigger MPAA. Is there a limit to how many times I can withdraw from a pot with less than £10,000 in it?

If I was planning on taking 25% tax free on top of the £1000 so a total of £1250 would that trigger any tax on it?

The small pots rule requires that you must not have previously withdrawn any money from that pension and your only option is to take the lot in one go.  75% will be taxable.  There are no tax advantages to taking small pots unless you are above the Life Time Allowance

You can use the small pots rule on a maximum of 3 pension pots.

Mr_Countdown

Linton said:

Mr_Countdown said:

Many thanks for your replies and apologies for late replying but my phone is currently broken so using the library computer!

Macron I was planning on using the 'Small pots regime' to not trigger MPAA. Is there a limit to how many times I can withdraw from a pot with less than £10,000 in it?

If I was planning on taking 25% tax free on top of the £1000 so a total of £1250 would that trigger any tax on it?

The small pots rule requires that you must not have previously withdrawn any money from that pension and your only option is to take the lot in one go.  75% will be taxable.  There are no tax advantages to taking small pots unless you are above the Life Time Allowance

You can use the small pots rule on a maximum of 3 pension pots.

Ahh right I didn’t know that and when I phoned them up they seemed to suggest I could just take some of it under the small pots regime. 

Mr_Countdown

PS when I spoke to them they also said I could withdrawn as much as I want as long as I leave at least £50 in. I imagine if I take it all they will close the SIPP?