What were your experiences of tax refunds when taking first drawdown

dont_use_vistaprint

Dazed_and_C0nfused said:

dont_use_vistaprint said:

My understanding is when you make your very first draw down of potentially taxable / crystallised money (not tax free funds)  , the pension provider will deduct 20% tax and you need to claim it back , if it results in you overpaying tax.

I don’t know if anyone else is experiencing the huge delays over the last 12 months with HMRC processing anything I’ve been waiting six months to claim the personal allowance others I know I’ve been waiting 3 to 4 months for much simpler refunds.

could someone please explain the process of claiming this money back and any experiences in the last 12 months? Was it straightforward and fast? Is it possible to claim it back immediately or must you wait until the following April and do it on a tax return?

Thank-you   

I don't know where you have read that but 20% tax is only deducted in some specific situations, for example a "small pot" withdrawal.

Normally the emergency tax code (1257L) will be operated on the first taxable payment.  So the amount of tax will depend on how much that is. 

It could consist of any of the following combinations being applied.

No tax
No tax + some 20% tax
No tax + some 20% tax + some 40% tax
No tax + some 20% tax + some 40% tax + some 45% tax

To some degree this is in your hands as you decide what the first taxable payment will be.

I think it my case it will be none of those and im advised  it will be a flat 20 % 

I currently have no tax code or personal allowance - this will not be resolved until I drawdown income - am the amount will be the max up to the personal &  savings allowance minus around 3,500 savings income so something  like £14K

dont_use_vistaprint

molerat said:

Far simpler to be aware of how the system works and take a first dip of under £1048 taxable and any further withdrawals calculating the x/12ths coded allowance.  Never had to reclaim tax from my own or MrsM's SIPP.

That would not work for me, they will tax at 20% and I have to claim it  back. This has been confirmed by the provider, HMRC & a tax advisor  

dont_use_vistaprint

eastcorkram said:

Dazed_and_C0nfused said:

Pat38493 said:

molerat said:

Far simpler to be aware of how the system works and take a first dip of under £1048 taxable and any further withdrawals calculating the x/12ths coded allowance.  Never had to reclaim tax from my own or MrsM's SIPP.

I guess it might be more complicated if you have multiple income streams e.g. DB pension, still working part time or suchlike?  Then you might have to contact HMRC to inform them which income streams are permanent to get the best tax code combination?

However HMRC never issue a tax code to a pension company first, the pension company has to report the first payment, usually using the emergency code (1257L) and then HMRC will review the code at that point.

I've had a code issued for a pension which hasn't started yet. First payment is due on 6th January. They've used DOX. Which I presume means it's all taxed at 40%. Which will probably be wrong, as I don't think I'd reach 40% this year, as I finished work on 20th December. Though I suppose HMRC are not aware of that yet. 

This is my concern as my paye account still shows expected tax this year of £87K even though I’ve had no earnings the last two tax years they refuse to update anything until I have earnings again. 

Hoenir

Pat38493 said:

molerat said:

Far simpler to be aware of how the system works and take a first dip of under £1048 taxable and any further withdrawals calculating the x/12ths coded allowance.  Never had to reclaim tax from my own or MrsM's SIPP.

I guess it might be more complicated if you have multiple income streams e.g. DB pension, still working part time or suchlike?  Then you might have to contact HMRC to inform them which income streams are permanent to get the best tax code combination?

Update your expected income via your online Personal Tax Account.  Job done. 

molerat

Taxing at 20% is only done when taking the full amount of the pension and no tax code is already in operation, partial withdrawals with no code in operation will use 1257LX.

Hoenir

dont_use_vistaprint said:

My understanding is when you make your very first draw down of potentially taxable / crystallised money (not tax free funds)  , the pension provider will deduct 20% tax and you need to claim it back , if it results in you overpaying tax.

That depends on a wide range of factors. Pension is just another taxable source of income. In essence processed in the same way as your employer does to pay your wages. Soon enough in the majority of cases everything self corrects.