Use my personal allowance or not?

toolateforsums

I have two big invested funds, a SIPP with around £860 k in , and a GIA account containing around £240k, which was made up from tax free cash released from my SIPP and some added inheritance.It also has Stocks and shares ISA's contained within. My withdrawals so far have been free of any income tax (as tax was already paid on the constituents or was tax free) and also no CGT 

I have been withdrawing solely from the GIA , BUT as a result not making use of my personal allowance of £12750 pa. 

Is this a mistake ? Should i be splitting withdrawals from both the GIA and taking £12750 from my SIPP to the same amount? Or does it in effect make no difference?

I appreciate your expert opinions and thoughts re the above!

ColdIron

The Personal Allowance is a use it or lose it allowance so it makes sense to make the best use of it. You won't have it forever, I am guessing you are not in receipt of the state pension yet, that will kill it

It's worth noting that withdrawals from your GIA are not taxable. The dividends/interest are taxable as they arise whether you withdraw or not, these are covered by your PA. Any capital gains are taxable on disposal whether you withdraw or not, those are not covered by your PA

dunstonh

I have been withdrawing solely from the GIA , BUT as a result not making use of my personal allowance of £12750 pa. 

Is this a mistake ?

Its not optimal. You have a chance to get £12750 out of the pension tax free (until you get other income).  You should take it and use your ISA allowances and do annual transactions on the GIA to use the CGT allowance.

toolateforsums

Sorry, I should have also pointed out that i am retired, 60 in a month and SP expected when Im 67.Not sure if that changes anything, but no other form of income in the future other than the above.

ColdIron

Chances are your SP will eat up all of your PA (and some) and you will look back at those lost years when you didn't make best use of it

I retired at 56 and withdrew over £100,000 taxable (£12,000 pa) from my SIPP without paying any tax. Now that would cost me over £20,000

Isthisforreal99

It would be bonkers not to

poseidon1

toolateforsums said:

Sorry, I should have also pointed out that i am retired, 60 in a month and SP expected when Im 67.Not sure if that changes anything, but no other form of income in the future other than the above.

Assuming personal allowance remains at £12570 until your SP age, seems you are missing out on  up to  £88,000 in tax free SIPP withdrawals in next 7 years, subject to any dividends/interest receipts from the unwrapped GIA portfolio.

As indicated by ColdIron it's simply use it or lose it.

Also stockpiling your Sipp will leave that much more exposed to IHT from 2027 onwards. Even if you don't need the Sipp income use it to max out your annual ISAs contributions. 

ali_bear

Is it too late to purchase an annuity? 

Don't know why you would leave the SIPP untouched. Unless possibly you would consider returning to work? You could be drawing a taxable income of 30k and it would probably never run out. 

On-the-coast

ali_bear said:

Is it too late to purchase an annuity? 

Don't know why you would leave the SIPP untouched. Unless possibly you would consider returning to work? You could be drawing a taxable income of 30k and it would probably never run out. 

Agree - More than 30k probably. 

But yes at least take the tax free 12500 per year (how much taxable dividends and interest are you accruing each year in your GIA?)

toolateforsums

ali_bear said:

Is it too late to purchase an annuity? 

Don't know why you would leave the SIPP untouched. Unless possibly you would consider returning to work? You could be drawing a taxable income of 30k and it would probably never run out. 

The SIPP hasn't been left untouched. i have withdrawn my 25% tax free lump sum, as advised by my FA due to nearing the lifetime allowance.I'm not considering any time returning to work. Annuity rates were poor, but better now i believe , but a one time decision with no turning back. the flexibility of drawdown , plus the potential opportunity to leave some money as part of my estate is part of my thinking. However, i have looked in more detail at a 5 year fixed term annuity, to derisk for a few years, and then decide what to do with the returned funds. BUT I will probably leave in for flexi access drawdown.

Triumph13

Basically every year that you don't use your PA is £2.5k of extra tax that you or your heirs will pay in the future, unless you are planning to die before age 75.