SIPP LUMP SUM AFTER ALREADY TAKING 25% TAX FREE

SVaz

Well if it’s an even split of 2 x £50k then you will both pay a mix of 20-45% depending on what you both earn.  

It’s a terrible idea as you both are still working. 

JohnF71

Linton said:

You say £350K pension total. How is it split? 

Downsides:
1) Taxable drawdown is taxed as income in the year it was taken. So £50K each will almost certainly put you both into a higher tax band.
2) If you just withdraw even just 1p of taxable income your annual pension contribution allowance which covers both personal and employers contributions is reduced to £10K from the default £60K. This will limit your options to save a sizeable lump sum for retirement.
3) What will you live on in retirement?
4) Financially it could be a bad idea in that your mortgage interest could well be less than your average return on your investments, so you lose more than you gain.

For most people doing what you are proposing is probably foolish, though your circumstances may be different to "most people". So think it through very carefully.

£350K pension is split 50/50 

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 

directors dividends £50K per annum each  

total £62K each

dunstonh

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum
is it advised? 

You haven't told us anything about the objectives and the impact on the rest of your life. 

What are the tax implications?

It would probably be cheaper to take a mortgage out and borrow that way.

You will lose 40% on all of it and see your personal allowance reduced.

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 
directors dividends £50K per annum each  
total £62K each

Minimum wage rules do not apply to shareholding directors.    Its for tax reasons that the salary is £12,570.

Why are you trying to rob your retirement years to spend on something in your working years?  
Taking the 25% TFC out to pay off a mortgage is usually not a good idea either.  However, that is too late now.

JohnF71

dunstonh said:

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum
is it advised? 

You haven't told us anything about the objectives and the impact on the rest of your life. 

What are the tax implications?

It would probably be cheaper to take a mortgage out and borrow that way.

You will lose 40% on all of it and see your personal allowance reduced.

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 
directors dividends £50K per annum each  
total £62K each

Minimum wage rules do not apply to shareholding directors.    Its for tax reasons that the salary is £12,570.

Why are you trying to rob your retirement years to spend on something in your working years?  
Taking the 25% TFC out to pay off a mortgage is usually not a good idea either.  However, that is too late now.

I won’t be retiring, I will work till I drop dead because I love the business we have built 

dunstonh

JohnF71 said:

dunstonh said:

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum
is it advised? 

You haven't told us anything about the objectives and the impact on the rest of your life. 

What are the tax implications?

It would probably be cheaper to take a mortgage out and borrow that way.

You will lose 40% on all of it and see your personal allowance reduced.

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 
directors dividends £50K per annum each  
total £62K each

Minimum wage rules do not apply to shareholding directors.    Its for tax reasons that the salary is £12,570.

Why are you trying to rob your retirement years to spend on something in your working years?  
Taking the 25% TFC out to pay off a mortgage is usually not a good idea either.  However, that is too late now.

I won’t be retiring, I will work till I drop dead because I love the business we have built 

In which case, accessing the pension will create greater tax for you than using money in the business.

Paying money from the business into the pension is a big tax saver for own-company directors.  You get money out of the business, reduce your CT bill, avoid NI and only pay 15% effective up to the basic rate band or 30% at the higher rate band when you do start taking it.

However, the minute you access a penny of the 75% taxable element of the pension, you are restricted to just £10k a year annual allowance to the pension.  Based on your earnings, that would create significant extra taxation over the long term.

squirrelpie

JohnF71 said:

I won’t be retiring, I will work till I drop dead because I love the business we have built 

Does your wife feel the same way? And what about if either of you gets a long-term illness?

Albermarle

JohnF71 said:

dunstonh said:

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum
is it advised? 

You haven't told us anything about the objectives and the impact on the rest of your life. 

What are the tax implications?

It would probably be cheaper to take a mortgage out and borrow that way.

You will lose 40% on all of it and see your personal allowance reduced.

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 
directors dividends £50K per annum each  
total £62K each

Minimum wage rules do not apply to shareholding directors.    Its for tax reasons that the salary is £12,570.

Why are you trying to rob your retirement years to spend on something in your working years?  
Taking the 25% TFC out to pay off a mortgage is usually not a good idea either.  However, that is too late now.

I won’t be retiring, I will work till I drop dead because I love the business we have built 

You will not find many like minds on this forum !

Linton

JohnF71 said:

dunstonh said:

both my wife and I have a combined £350K Remaining which we would like to take a £100K lump sum
is it advised? 

You haven't told us anything about the objectives and the impact on the rest of your life. 

What are the tax implications?

It would probably be cheaper to take a mortgage out and borrow that way.

You will lose 40% on all of it and see your personal allowance reduced.

We currently both take the following each as directors of own limited company 

minimum wage per annum £12K each 
directors dividends £50K per annum each  
total £62K each

Minimum wage rules do not apply to shareholding directors.    Its for tax reasons that the salary is £12,570.

Why are you trying to rob your retirement years to spend on something in your working years?  
Taking the 25% TFC out to pay off a mortgage is usually not a good idea either.  However, that is too late now.

I won’t be retiring, I will work till I drop dead because I love the business we have built 

May be, but it would be prudent to consider keeping your options open if circumstances change. You don’t want to be in a position where you cannot afford to stop working.

For example what would happen if your business declines through changes in the world markets, technology, or your and your wife’s ability to manage it. What happens if one of you dies, could the survivor continue? Would they want to?

Mutton_Geoff

JohnF71 said:

We have not taken any pension income so money just sitting there 

You said you're both still working. Isn't the money "just sitting there" until you are no longer working and want to maintain your lifestyle?

Tempting though it may be, rather than deplete your pension pot, is there an opportunity to work more or spend less to achieve your immediate financial goals?

Albermarle

Mutton_Geoff said:

JohnF71 said:

We have not taken any pension income so money just sitting there 

You said you're both still working. Isn't the money "just sitting there" until you are no longer working and want to maintain your lifestyle?

Tempting though it may be, rather than deplete your pension pot, is there an opportunity to work more or spend less to achieve your immediate financial goals?

OP said ' I won’t be retiring, I will work till I drop dead because I love the business we have built '