Use my personal allowance or not?

kinger101

You definitely need to making the most of the tax free allowance.  Hope you're also filling the  ISA each year and preferentially depleting the taxable pot.

There's other things you should be doing for tax efficiency as well.

Selling one non-wrapped equity fund up to the CGT alliance each year than then buying a nearly identical one with the proceeds.

The average return on premium bonds is often better than taxed interest as well.

It's not clear what your cash/bond versus equity split is, but the money you need over the next few years should be derisked.

DRS1

toolateforsums said:

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!

If you do withdraw 12750 taxable income from your SIPP you might horror of horrors find yourself paying a little 20% income tax.  This years personal allowance is 12570.

Still why not pay a bit of 20% tax?

I am interested that you do not split out the ISA from the GIA.  I think most people would and would spend the GIA first as it is generating taxable income and gains.  But as you say a mix of SIPP withdrawals and GIA spend would make sense - especially transferring £20k slugs from the SIPP to the ISA.

kinger101

Just noticed you also mentioned annuity was a one time decision.  Buying one isn't reversible, but you haven't bought one.  You can still buy at any time from SIPP, even if you've taken TFLS.

Regardless of that, the only reason not to withdraw at basic rate tax now is to minimize tax on non sheltered funds.

Is your FA an IFA?

Id expect some tax planning included.  The risk with barely touching a SIPP of 850K for 5 plus years in an environment of frozen tax bands and higher inflation is that you end up paying higher rate tax.  It would of course mean markets have probably worked well for you.  But fully exploiting the nil rate band doesn't really change planning on avoiding the higher rate.  You just need total income below 50,270 pa while reducing unsheltered capital 

Smudgeismydog

I would also advocate drawing taxable income from your SIPP to fully utilise your personal allowance, you have a 7 year window until your state pension, use it or lose it!

Actually, I plan to take taxable income up to the higher rate bracket as kinger101 notes above. This is more than I need, so I will put any surplus into an ISA, spend or gift (under the regular expenditure route for IHT efficiency).