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Taking a Small Lump Sum Tax Free?
Options

RolloTomasi68
Posts: 11 Forumite

I'm 56, retired and only get about £3k a year income from non-tax efficient savings.
I have a decent amount in Cash and S&S ISAs which I dip into.
My questions are about my SIPP, which I've been paying £240 a month in and have been getting £60 top-up added from many years (via HL).
1. If I take out a one-off lump sum of around £7K and am taxed at source can I claim that back as I'm still well within my PA?
2. Will taking out a small lump sum stop me from getting the £60 a month tax relief top up if I keep putting in £240 a month (which I believe I can claim until 75)?
Thanks.
I have a decent amount in Cash and S&S ISAs which I dip into.
My questions are about my SIPP, which I've been paying £240 a month in and have been getting £60 top-up added from many years (via HL).
1. If I take out a one-off lump sum of around £7K and am taxed at source can I claim that back as I'm still well within my PA?
2. Will taking out a small lump sum stop me from getting the £60 a month tax relief top up if I keep putting in £240 a month (which I believe I can claim until 75)?
Thanks.
0
Comments
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it depends how you take the lump sum. Is the balance big enough that your £7k is all from the 25% tax free part?
Drawing down will not affect you being able to contribute the £3600 gross per annumI’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
& Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
All views are my own and not the official line of MoneySavingExpert.0 -
RolloTomasi68 said:I'm 56, retired and only get about £3k a year income from non-tax efficient savings.
I have a decent amount in Cash and S&S ISAs which I dip into.
My questions are about my SIPP, which I've been paying £240 a month in and have been getting £60 top-up added from many years (via HL).
1. If I take out a one-off lump sum of around £7K and am taxed at source can I claim that back as I'm still well within my PA?
2. Will taking out a small lump sum stop me from getting the £60 a month tax relief top up if I keep putting in £240 a month (which I believe I can claim until 75)?
Thanks.
2. NoGoogling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
I have around £65k in the SIPP.
I just want to take £7k out to cover some costs instead of dipping into my ISAs again, but it's pointless doing this if I'm going to get taxed.
As stated I don't have much taxable income.
I was hoping I could just take out £7k every year or two and not get taxed until I get my state pension.0 -
Savings dont generate income. Investments can generate income and gains. Sounds like you have £60k in cash isa.
1. Too vague question to give any meaninful answer
2. Nope
0 -
Why not book an appointment with Pension Wise to get some guidance on accessing your SIPP?
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/explore-your-pension-options
https://www.hl.co.uk/retirement/ufpls
https://www.hl.co.uk/retirement/drawdown
See also https://www.thisismoney.co.uk/money/pensions/article-13472205/Lump-sums-pensions-rules-STEVE-WEBB.html
Have you obtained a state pension forecast?
https://www.gov.uk/check-state-pension
1 -
RolloTomasi68 said:I have around £65k in the SIPP.
I just want to take £7k out to cover some costs instead of dipping into my ISAs again, but it's pointless doing this if I'm going to get taxed.
As stated I don't have much taxable income.
I was hoping I could just take out £7k every year or two and not get taxed until I get my state pension.
With £65k in the SIPP then £16,250 of that is tax free. You could use a number of methods at this point (assuming minimal other income)
Option 1.
Year 1 - Crystallise £28k of the £65k and drawdown your £7k TFLS. Leave the crystallised £21k in there for the future, along with the remaining £37k uncrystallised
Year 2 - Crystallise £28k of the £37k and drawdown your £7k TFLS. Leave the crystallised £42k plus growth (£21k from this year plus last year's £21k plus growth) in there for the future, along with the remaining £9k uncrystallised
Year 3 - Crystallise the remaining £9k plus growth and take 25% tax free. The rest goes in the crystallised pot. Anything further you take, from the crystallised pot, will be taxable but you can calculate an amount that keeps you under the personal allowance - you may pay tax but you can get it back.
Year 4 onwards - Anything you take, from the crystallised pot, will be taxable but you can calculate an amount that keeps you under the personal allowance - you may pay tax but you can get it back.
Option 2.
Calculate how much headroom you have under the personal allowance after your other income. Say it is £9k then you can take out £12k of which £3k (25%) will be tax free and £9k (the remaining 75%) will be taxed at 0%.
This makes better use of your personal allowance.
I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
& Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
All views are my own and not the official line of MoneySavingExpert.0
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