Please sense check my SIPP withdrawal calculation

bownyboy

af1963 said:

Are you aiming to take as much as possible from the SIPP without paying any tax on either the SIPP payment or the dividends?

If so, her total taxable income needs to stay below (12570+1260) = 13830.  The first 1000 of dividend income isn't taxed so she has 5000 of taxed dividend income, and has (13830-5000) = 8830 of allowance to cover taxable income from the SIPP; plus she can take the associated tax free cash of 2943.  Total she can take from SIPP is then 11773.

If she took the full (increased) personal allowance from the SIPP she could take 13830 plus 4610 tax free cash =18440. Then £5000 of the dividends would be taxed at the dividend rate of 8.75% so she'd pay 437 in tax. That might be worth doing as it effectively gets an extra 6666 out of the SIPP at a cost of 437 in tax - about 6% of the extra payment.  Withdrawing the money later from the SIPP, after other pensions start, could be taxed at 15%.

Yes, thank you. This is exactly what we are trying to calculate.

I hadn't thought of your second point and it does make sense to take the extra £6,666 out for only a cost of £437. 

bownyboy

So FYI I did the SIPP UFPLS withdrawal from Hargreaves Lansdown.

It took one month from the online request to money being in the bank.

Process was as follows:

6th March Answered questions online to receive paper form in the post

9th March Form arrived filled out and returned

13th March Secure message to confirm receipt of the form. Says 5-10 working days to process

22nd March - Secure message to say insufficient cash funds in SIPP so need to sell units to equal to the UFPLS withdrawal. Also need to answer another question ‘is this your first withdrawal?’ (had already ticked this box on the paper form, not sure why had to answer it again).

Nowhere on the application form did it say you needed to sell units to make the cash available. I (wrongly) assumed they would be sold as part of this process automatically.

Sold units and replied to message same day.

26th March - secure message; thanks, we will continue with your application

2nd April - -£4,601.70 taken off in tax and £13,838.30 paid out

3rd April - money received into bank account

4th April - Logged into HMRC personal tax account to request tax back.

Dazed_and_C0nfused

Has she notified HMRC of the dividend income yet?

bownyboy

Dazed_and_C0nfused said:

Has she notified HMRC of the dividend income yet?

Yes, its one of the questions on the P55 form that you fill out.