UFPLS and tax

Green_hopeful

I have paid my termination payment (from the last financial year) into a SIPP and would like to take the maximum ‘tax free’ amount out each year. I don’t want to pay tax and reclaim it.  I turn 55 in October. My plan is to take £1000 in November and then take the rest once my tax code is sorted. Will this work and do I need to take a bit at a time or can I just take the rest in one lump. The SIPP is with Fidelity and it looks relatively straightforward to take the payments. I only need the SIPP to last for a few years as my DB pension will start to pay at 60. 

molerat

If you take £1000 as the first UFPLS it will be taxed on a 1257LX basis where £1048.26 is tax free so no tax would be deducted, you could actually take £1397 with £349.25 tax free and £1047.75 taxable but within the allowance.  A tax code will then be issued and you can  withdraw as necessary with a cumulative X 1/12ths of the coded amount plus the 25% tax free each withdrawal.  The whole annual coded tax free amount will not be available until March.

dunstonh

I have paid my termination payment (from the last financial year) into a SIPP and would like to take the maximum ‘tax free’ amount out each year. I don’t want to pay tax and reclaim it.  I turn 55 in October. My plan is to take £1000 in November and then take the rest once my tax code is sorted. Will this work and do I need to take a bit at a time or can I just take the rest in one lump. 

It may not work for your objective depending on when you draw it.

You need to take a payment out in month 12 of the payroll cycle for it to work.  in the first year, that means a bit now and a bit more after march 7th (first payment would be emergency tax and second payment in the final payroll month would correct it).  Then in future years you can stick to after March 7th as a single payment.      If you need some earlier, just remember to do another one in month 12.

Green_hopeful

Thanks both. I will see how I go.