SIPP Draw Down Rules & HMRC Self Assessment

Awakeatlast

Hi,

I'm after a little help please. 

I'm looking to draw down from my SIPP this month. The funds I am drawing down will be used to pay off my mortgage. 

I want to take 25% which will be tax free.

I also want to drawdown an additional amount.

If I understand HMRC rules correctly, my SIPP provider is required to stop income tax (and I assume national insurance) on the additional withdrawal.

I'm aware that if I take more than £4,189 (not including the tax free element) in any month my SIPP provider will tax any sum above this at the 40% rate.

During this tax year I will not earn more than the 40% threshold. I will be able to claim any over payment on tax back through self assessment. As such I am planning to drawdown below the monthly £4,189 from my SIPP.

However, is it possible to reclaim any over payments on tax before I submit my self assessment at the end of January 2026, and thus draw down a larger sum this month to pay off more on my mortgage.

I hope I've explained that well enough

Thank you in advance

Kind regards

eskbanker

If you're submitting a self assessment in January 2026, it'll relate to 2024/25, so won't address taxable income in the current year?

Dazed_and_C0nfused

Awakeatlast said:

Hi,

I'm after a little help please. 

I'm looking to draw down from my SIPP this month. The funds I am drawing down will be used to pay off my mortgage. 

I want to take 25% which will be tax free.

I also want to drawdown an additional amount.

If I understand HMRC rules correctly, my SIPP provider is required to stop income tax (and I assume national insurance) on the additional withdrawal.

I'm aware that if I take more than £4,189 (not including the tax free element) in any month my SIPP provider will tax any sum above this at the 40% rate.

During this tax year I will not earn more than the 40% threshold. I will be able to claim any over payment on tax back through self assessment. As such I am planning to drawdown below the monthly £4,189 from my SIPP.

However, is it possible to reclaim any over payments on tax before I submit my self assessment at the end of January 2026, and thus draw down a larger sum this month to pay off more on my mortgage.

I hope I've explained that well enough

Thank you in advance

Kind regards

You are mixing up two different tax years.

NoMore

Also NI is not payable on Pension Income.

squirrelpie

And if you take any taxable cash at all from your pension, it will limit your future pension contributions (reduce the limit from £60,000 pa to £10,000 pa).

In short, it seems like you need to tell us more detail and prepare to change your plan.

Marcon

squirrelpie said:

In short, it seems like you need to tell us more detail and prepare to change your plan.

....or OP could just read this and reclaim tax this way: https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

eastcorkram

NoMore said:

Also NI is not payable on Pension Income.

.......yet. 

squirrelpie

Marcon said:

squirrelpie said:

In short, it seems like you need to tell us more detail and prepare to change your plan.

....or OP could just read this and reclaim tax this way: https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Reclaiming excess tax doesn't affect the MPAA

Marcon

squirrelpie said:

Marcon said:

squirrelpie said:

In short, it seems like you need to tell us more detail and prepare to change your plan.

....or OP could just read this and reclaim tax this way: https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Reclaiming excess tax doesn't affect the MPAA

I was answering what OP actually asked - which was about reclaiming overpaid tax.

squirrelpie

Marcon said:

squirrelpie said:

Marcon said:

squirrelpie said:

In short, it seems like you need to tell us more detail and prepare to change your plan.

....or OP could just read this and reclaim tax this way: https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55

Reclaiming excess tax doesn't affect the MPAA

I was answering what OP actually asked - which was about reclaiming overpaid tax.

But your comment was in response to what I wrote, not what they wrote. And reclaiming tax isn't the issue.

zagfles

You shouldn't need to reclaim, it should happen via the PAYE system, but you may need to make another token withdrawal later in the tax year. 

When you make the first withdrawal, HMRC should allocate a tax code to the drawdown pension. They will make an assumption about the annual income from the pension, usually on the basis you'll continue withdrawing at the same rate. But you can onto your personal tax account and give an estimate, so this should correct the tax code to something reasonable. For instance, if you have a job that uses up your personal allowance, the tax code may be BR (ie all taxed at basic rate). If you don't have another income, then it should be 1257T or similar. The important thing to check is there is NO "month 1" marker, usually a M1 or X at the end of the tax code, as then it won't be cumulative. 

So, when you get your first payment, it may be overtaxed, but if you make a token withdrawal later in the tax year, assuming you have a cumulative tax code, you should get the tax refunded, and if you make a final withdrawal in March, provided tax codes are correct, any overpaid tax should be fully refunded.