Multiple incomes: tax code allocation

marlot

I have four income streams.  Three are DB pensions, so pay monthly.  One is a SIPP, which I draw as needed.  Typically late in the tax year.

HMRC have allocated the tax codes, such that the bulk of the tax comes from the DB pensions.

It would suit me better for the bulk of the tax to come out of my SIPP drawdown.

Is there any way to change the allocation of the tax codes?

molerat

You can certainly speak to HMRC and get the codes re-allocated.  Is the SIPP showing the accurate amount that you will draw in your tax account ?  HMRC though may be unhappy to allocate the bulk of the coding to an end of year income stream that you can decide not to take if that would lead to an underpayment from the regular income streams.

Linton

But you say you will drawdown the SIPP as needed.  What happens if you dont need to drawdown one year or drawdown insufficient to pay the tax due on the other income streams? Note that HMRC wont take more than 50% tax off income from any one stream.

The normal way HMRC cope with multiple income streams is to put the tax allowances onto the largest steady stream and have small ones at BR.  So the small pensions are charged the highest tax rate.

I believe you can change tax code allocations from your personal tax account.

Dazed_and_C0nfused

Linton said:

But you say you will drawdown the SIPP as needed.  What happens if you dont need to drawdown one year or drawdown insufficient to pay the tax due on the other income streams? Note that HMRC wont take more than 50% tax off income from any one stream.

The normal way HMRC cope with multiple income streams is to put the tax allowances onto the largest steady stream and have small ones at BR.  So the small pensions are charged the highest tax rate.

I believe you can change tax code allocations from your personal tax account.

I'm not convinced you can actually do that.  I think you can provide updates of your expected taxable income for each pension but the impact of that will depend on the amounts, exiting tax codes etc.

Without knowing the expected income from each source its difficult to say what the optimum position would be.