DRAWDOWN WITHDRAWAL AND TAX

epsilon4900

Hi

I can see that there is already a thread about this but I wanted to start my own as I have different circumstances. I hope that's ok!

I transferred a pension to AJ Bell in the summer. I took a TFLS and deliberately took an extra £10.
This was in the hope that it would lead HMRC to issue a helpful tax code to AJ Bell for me for future withdrawals.

I have just seen that the tax code provided to AJ Bell is 1T which I understand to mean that I will
have to pay 20% tax on anything I take out from this point. It says my personal allowance is now £19.

I looked at HMRC and realized that they have given my tax code to a small amount of superannuation which I began to receive summer 2024. So that makes sense to me they wouldn't give that allowance to AJ Bell for my SIPP.  Frustrating though.

I never earn anywhere near my tax allowance as I am self employed and self assess year to year and so on.

So my question is IF I take anything more out of this SIPP / Drawdown account in this tax year will I just have to accept that HMRC will take 20% tax and have to try to get it back in the new tax year from April?

I have never been in this situation before and am quite stressed about having to approach HMRC to ask for tax back in the next tax year when I won't have self assessed for it for many months after that time?

Any thoughts?

I had naievely thought I could take something like £800 out because that would mean the system would not think I would go over my allowance but I had forgotten about the superannuation.

Many thanks.!

Dazed_and_C0nfused

epsilon4900 said:

Hi

I can see that there is already a thread about this but I wanted to start my own as I have different circumstances. I hope that's ok!

I transferred a pension to AJ Bell in the summer. I took a TFLS and deliberately took an extra £10.
This was in the hope that it would lead HMRC to issue a helpful tax code to AJ Bell for me for future withdrawals.

I have just seen that the tax code provided to AJ Bell is 1T which I understand to mean that I will
have to pay 20% tax on anything I take out from this point. It says my personal allowance is now £19.

I looked at HMRC and realized that they have given my tax code to a small amount of superannuation which I began to receive summer 2024. So that makes sense to me they wouldn't give that allowance to AJ Bell for my SIPP.  Frustrating though.

I never earn anywhere near my tax allowance as I am self employed and self assess year to year and so on.

So my question is IF I take anything more out of this SIPP / Drawdown account in this tax year will I just have to accept that HMRC will take 20% tax and have to try to get it back in the new tax year from April?

I have never been in this situation before and am quite stressed about having to approach HMRC to ask for tax back in the next tax year when I won't have self assessed for it for many months after that time?

Any thoughts?

I had naievely thought I could take something like £800 out because that would mean the system would not think I would go over my allowance but I had forgotten about the superannuation.

Many thanks.!

Why not just update the estimate of your expected pension income from AJ Bell on your Personal Tax Account.  That will prompt an update to your tax codes.

Marcon

Ask HMRC to allocate your personal allowance differently so that the SIPP has a higher tax code associated with it. See https://www.gov.uk/find-hmrc-contacts/income-tax-enquiries

epsilon4900

Marcon said:

Ask HMRC to allocate your personal allowance differently so that the SIPP has a higher tax code associated with it. See https://www.gov.uk/find-hmrc-contacts/income-tax-enquiries

Thanks for that. I didn't realize I could do that.

squirrelpie

epsilon4900 said:

Marcon said:

Ask HMRC to allocate your personal allowance differently so that the SIPP has a higher tax code associated with it. See https://www.gov.uk/find-hmrc-contacts/income-tax-enquiries

Thanks for that. I didn't realize I could do that.

But why would you want to do that? You'll still pay the same total amount of tax; it's just they will take more from your superannuation. You won't need to reclaim tax; HMRC will work it out so any under- or over- payments are corrected by the end of the tax year. That's as long as you tell them how much you're earning in your self-employment.

molerat

squirrelpie said:

epsilon4900 said:

Marcon said:

Ask HMRC to allocate your personal allowance differently so that the SIPP has a higher tax code associated with it. See https://www.gov.uk/find-hmrc-contacts/income-tax-enquiries

Thanks for that. I didn't realize I could do that.

But why would you want to do that? You'll still pay the same total amount of tax; it's just they will take more from your superannuation. You won't need to reclaim tax; HMRC will work it out so any under- or over- payments are corrected by the end of the tax year. That's as long as you tell them how much you're earning in your self-employment.

But OP seems to be saying that the superannuation does not use up all the allocated allowance so it makes sense to go into the personal tax account and enter the correct expected annual amounts for all coded incomes.

So OP, what is the annual income from the superannuation, what code is allocated to it and what does your tax account show for the expected income from that and any other source ?

epsilon4900

Thanks for these comments. All very helpful.

My superann is £1300 a year so it doesn't go anywhere near my annual allowance. On my self employed earnings I will earn in this tax year not more than £7472 ( it could even be less depending on my expenses and when I take leave which is unpaid obviously. ) If you add the £1308 a year from superann that gets to £8780 which leaves        £ 3790 of my tax allowance left. Actually it would be £3780 as I took out £10 from drawdown when I took my TFLS. I would like to withdraw that £3790 at least in this tax year BUT I am not keen on having to pay tax and then claim it back if it can be done a different way. I have no idea about informing HMRC about different amounts for a tax code?...

Albermarle

 I have no idea about informing HMRC about different amounts for a tax code?...

You can do it easily in your on line personal tax account. If you have not registered for this is worth doing, as you can more easily check what is going on with your tax.
Personal tax account: sign in or set up - GOV.UK

To be honest with three streams of income, and one ( drawdown) being ad hoc withdrawals, it is normal that getting all the tax codes and tax just right is not that simple.

Dazed_and_C0nfused

epsilon4900 said:

Thanks for these comments. All very helpful.

My superann is £1300 a year so it doesn't go anywhere near my annual allowance. On my self employed earnings I will earn in this tax year not more than £7472 ( it could even be less depending on my expenses and when I take leave which is unpaid obviously. ) If you add the £1308 a year from superann that gets to £8780 which leaves        £ 3790 of my tax allowance left. Actually it would be £3780 as I took out £10 from drawdown when I took my TFLS. I would like to withdraw that £3790 at least in this tax year BUT I am not keen on having to pay tax and then claim it back if it can be done a different way. I have no idea about informing HMRC about different amounts for a tax code?...

Based on what you have posted you just need to update your estimated pension from AJ Bell to be £3,790.

That should result in your tax code for AJ Bell being amended to 379T and you would not pay any tax if you take a further £3,780 after 5 March 2026 (and before 6 April 2026).  If you take sone before 5 March you will pay some tax but get it refunded by AJ Bell with your final payment in March.

epsilon4900

Albermarle said:

 I have no idea about informing HMRC about different amounts for a tax code?...

You can do it easily in your on line personal tax account. If you have not registered for this is worth doing, as you can more easily check what is going on with your tax.
Personal tax account: sign in or set up - GOV.UK

To be honest with three streams of income, and one ( drawdown) being ad hoc withdrawals, it is normal that getting all the tax codes and tax just right is not that simple.

Thanks. I shall certainly look into that. It sounds like though complex it could solve this issue.

epsilon4900

Dazed_and_C0nfused said:

epsilon4900 said:

Thanks for these comments. All very helpful.

My superann is £1300 a year so it doesn't go anywhere near my annual allowance. On my self employed earnings I will earn in this tax year not more than £7472 ( it could even be less depending on my expenses and when I take leave which is unpaid obviously. ) If you add the £1308 a year from superann that gets to £8780 which leaves        £ 3790 of my tax allowance left. Actually it would be £3780 as I took out £10 from drawdown when I took my TFLS. I would like to withdraw that £3790 at least in this tax year BUT I am not keen on having to pay tax and then claim it back if it can be done a different way. I have no idea about informing HMRC about different amounts for a tax code?...

Based on what you have posted you just need to update your estimated pension from AJ Bell to be £3,790.

That should result in your tax code for AJ Bell being amended to 379T and you would not pay any tax if you take a further £3,780 after 5 March 2026 (and before 6 April 2026).  If you take sone before 5 March you will pay some tax but get it refunded by AJ Bell with your final payment in March.

Thanks. I will definetly explore doing just that. It is irritating that AJ Bell did not advise me similarly but I guess they just don't give advice so that's fair enough. I am glad I checked though before I went ahead and drew down some monies as I had forgotten that the HMRC would give my tax code first in full to the superann authority.