Interactive Investor first Drawdown withdrawal

Pat38493

Dazed_and_C0nfused said:

Pat38493 said:

I requested a one time drawdown from II of £1100 so that I could get a tax code applied.

I have not received any money yet but the gross amount had been deducted from my cash.  I noticed that they have now updated a tax code "1257L" and tax basis "Month 1".  It says on their website this code "was received from HMRC".  This income stream does not yet appear on my gov.uk portal.

I think this means that I will pay only £10.50 in tax?  This is incorrect because actually this should be taxed at BR but I guess HMRC will update it again when they get the actual amount through?

Based on the information HMRC already has about the current tax year, it's impossible for this tax code to be correct, but I guess they only review it once an amount is received later?

Did you consider taking a smaller payment for your first one?

That is the normal way to go if you know basic rate tax is going to be payable.

With one or two exceptions the first payment would always have the emergency code (1257L) operated so you end up owing tax.

If you have another pension in payment you can expect a reduced tax code, either for the rest of current tax year or possibly from April 2026, to collect the ~£210 you likely now owe.

To be honest this was what I considered a smaller withdrawal.  I want to take out about £3300 this year in order to fill up my 20% tax band after stopping work in October.  I just divided this by 3, but if I had known more about it I probably would have just drawn £1000 or less on the first withdrawal - I did know that I should make a small withdrawal on the first one but I should have made it even smaller.

However I'm not that bothered if I end up owing a couple of hundred quid at year end that's fine - I am more interested in having the right tax codes for next tax year.