Tax Paid on Drawdown, query

Intoodeep

I have just started to draw down an amount from my retirement account, the amount is £1500 (Monthly), my current Tax Code is 1130L and I have received today £1409.80, which is more than I expected.
Could anyone please help with the calculation ?

Linton

If you have multiple income streams a separate tax code will be needed for each one.  These separate tax codes will determine how your total tax allowance is to be allocated.

Is this your first ever taxable drawdown from this particular account? 

If so HMRC wont have issued a tax code so the pension company will need to use an emergency tax code of 1257L calculated on a non accruing M1 basis. Once HMRC know you have a new income stream they will allocate the separate tax codes  

The emergency tax code will operate by allocating £1257/12 =£1047.5 to each month.  £1500-£1047.5=£452.5 £452.5 taxed at 20%= $£90.5.  £1500-£90.5=£1409.7 which is what you received, or near enough.

Once the new tax code is received the amount of tax deducted will be greater to take account of both your incomes plus the underpayment of tax in the first month.

molerat

Why do you think the code on the pension is 1130L? A first draw will be at 1257LX which is borne out by those figures .  Once HMRC have the notification from the pension provider they will issue a code.   Your tax account will most likely be showing that now . 

Linton

molerat said:

Why do you think the code on the pension is 1130L? A first draw will be at 1257LX which is borne out by those figures .  Once HMRC have the notification from the pension provider they will issue a code.   Your tax account will most likely be showing that now . 

My assumption is that the 1130L is the tax code on another income stream. 

eastcorkram

I can see how that works if you plan to do the same thing every month. If I draw down say £1500 this month, it would be the first time, would HMRC assume I'm going to take the same every month? Does it matter, if I then don't take anymore for a year or more?

Linton

eastcorkram said:

I can see how that works if you plan to do the same thing every month. If I draw down say £1500 this month, it would be the first time, would HMRC assume I'm going to take the same every month? Does it matter, if I then don't take anymore for a year or more?

Yes, the tax code will be issued on the basis of a regular monthly income.  It doesnt matter if you dont take any more but there would almost certainly be a tax adjustment at the end of the year to account for the emergency tax code being wrong for your particular circumstances.

If you do have further drawdowns PAYE will correct any initial error in subsequent payments.

Dazed_and_C0nfused

molerat said:

Why do you think the code on the pension is 1130L? A first draw will be at 1257LX which is borne out by those figures .  Once HMRC have the notification from the pension provider they will issue a code.   Your tax account will most likely be showing that now . 

Reading between the lines I think the op has an existing tax code of 1130L (or more likely 1130N), not that that is the code used on the first payment 🤔