Paying income tax when taking money out of drawdown pension

XzavierWalnut

Update. I requested a withdraw payment of £5k, which would have still left me with £1.5k spare on my tax code.
Contacted HMRC today to see if I could transfer £5K to my drawdown pension but was advised not.
Spoke to my pension provider and have cancelled the £5k drawdown, and will do a new request for £1k so I can get a tax code assigned to that fund..
I will have to pay emergency tax on the £1K but I will claim that back, and then increase my tax code so I can withdraw the other £4K.
Lesson learnt, I should have not assumed anything and done more research.

Dazed_and_C0nfused

XzavierWalnut said:

Update. I requested a withdraw payment of £5k, which would have still left me with £1.5k spare on my tax code.
Contacted HMRC today to see if I could transfer £5K to my drawdown pension but was advised not.
Spoke to my pension provider and have cancelled the £5k drawdown, and will do a new request for £1k so I can get a tax code assigned to that fund..
I will have to pay emergency tax on the £1K but I will claim that back, and then increase my tax code so I can withdraw the other £4K.
Lesson learnt, I should have not assumed anything and done more research.

If this is the first taxable payment from this pension then the emergency tax code, 1257L, is used so the first £1,048 has no tax deducted.

Even if you took more there would be nothing for you to claim back, the pension company would refund any overpaid tax when the next payment, with a new tax code in place, was paid later in this tax year.

XzavierWalnut

Dazed_and_C0nfused said:

XzavierWalnut said:

Update. I requested a withdraw payment of £5k, which would have still left me with £1.5k spare on my tax code.
Contacted HMRC today to see if I could transfer £5K to my drawdown pension but was advised not.
Spoke to my pension provider and have cancelled the £5k drawdown, and will do a new request for £1k so I can get a tax code assigned to that fund..
I will have to pay emergency tax on the £1K but I will claim that back, and then increase my tax code so I can withdraw the other £4K.
Lesson learnt, I should have not assumed anything and done more research.

If this is the first taxable payment from this pension then the emergency tax code, 1257L, is used so the first £1,048 has no tax deducted.

Even if you took more there would be nothing for you to claim back, the pension company would refund any overpaid tax when the next payment, with a new tax code in place, was paid later in this tax year.

Thanks for the info. This is just a one off payment (now 2), it is not a regular pension. Not yet anyway. I am basically withdrawing the growth amount  this tax year and next, whilst I am not eligible to pay income tax, which I will have to in 4 years when I get my state pension.

Beddie

I got taxed on a UFPLS withdrawal, filled in the online HMRC claim form and got a refund in 3 weeks.

Qyburn

Beddie said:

I got taxed on a UFPLS withdrawal, filled in the online HMRC claim form and got a refund in 3 weeks.

Same here. Not sure why so many people advise to just wait. The only inconvenience with the form is estimating savings interest, but it's well worth the few minutes in order to get the tax refund nearly a year earlier.

dont_use_vistaprint

I have just found even with 1257LX , they will tax you if they determine from a previous self assessment you have additional estimated income.


i took £400 and got tax £80 because it seems as well as the £1677 pension payments this tax year (Dec-mar) they believe I have £15,000 of other income this tax year, likely based on my last self assessment

Dazed_and_C0nfused

dont_use_vistaprint said:

I have just found even with 1257LX , they will tax you if they determine from a previous self assessment you have additional estimated income.


i took £400 and got tax £80 because it seems as well as the £1677 pension payments this tax year (Dec-mar) they believe I have £15,000 of other income this tax year, likely based on my last self assessment

You are getting confused.

A tax code of 1257L, even on a non-cumulative basis, would mean no tax was deducted from £400.

£80 being deducted indicates either tax code BR or 0T was used on that payment.  And only the pension company can explain why they used one of those codes.

trevjl

After good advice on here a few months ago, I did exactly what has been suggested in this thread. Took £1K from drawdown from Aviva to trigger a tax code. No tax payable and would trigger a tax code, normally in 30 days I was told. That was about 80 days ago and not heard anything, Intend to take another £5K soon and the balance to £12570 in March. I am guessing this works.
Edit: Just checked online and they have indeed given me a tax code, it was apparently 1222LX and changed on 3rd December to 1237LX, not sure how or why not 1257 ? any ideas welcome 

molerat

trevjl said:

After good advice on here a few months ago, I did exactly what has been suggested in this thread. Took £1K from drawdown from Aviva to trigger a tax code. No tax payable and would trigger a tax code, normally in 30 days I was told. That was about 80 days ago and not heard anything, Intend to take another £5K soon and the balance to £12570 in March. I am guessing this works.

The tax code is usually issued the same day as the first taxable payment is reported to HMRC, have you checked your on line tax account, you don't always get "notified".

Albermarle

molerat said:

trevjl said:

After good advice on here a few months ago, I did exactly what has been suggested in this thread. Took £1K from drawdown from Aviva to trigger a tax code. No tax payable and would trigger a tax code, normally in 30 days I was told. That was about 80 days ago and not heard anything, Intend to take another £5K soon and the balance to £12570 in March. I am guessing this works.

The tax code is usually issued the same day as the first taxable payment is reported to HMRC, have you checked your on line tax account, you don't always get "notified".

It seems that sometimes you do get an e mail notification, and sometimes not. No idea why !