Tax code for SIPP withdrawal

aroominyork

I just made my first crystallised SIPP withdrawal (I made a PCLS one earlier) of £13,700 but only received £9156.80. On a tax code of 1257LX that seems to make sense, albeit that my online HMRC account shows estimated tax for the year of £226. My question is whether every SIPP withdrawal will be taxed like this, and if not how will my tax code be set?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6655436/tax-code-for-sipp-withdrawal

Without knowing your overall tax situation that's impossible to answer with any degree of accuracy.

aroominyork

No other income apart from a couple of £k for some consultancy. SP not until 2028.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81885731#Comment_81885731

Unless Marriage Allowance is a factor then you can expect to remain on the emergency code of 1257L but on a cumulative basis.

aroominyork

I thought emergency means, by definition, that it is NOT cumulative.

molerat

The pension should have an ongoing code set against it within a couple of days so what is showing in your on line tax account ? Any tax code showing has been issued by HMRC.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81885879#Comment_81885879

Nope, the tax code and basis of operation (cumulative or non-cumulative) are two different things.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81885887#Comment_81885887

They issued 1257LX when I made the withdrawal.

https://forums.moneysavingexpert.com/discussion/comment/81885899#Comment_81885899

Is 1257L emergency? I thought it was the standard code for everyone, before adjustments.

I'm trying to understand whether I'll always be over-taxed on withdrawals and have to get it back on self-assessment.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81885907#Comment_81885907

1257L is definitely the emergency tax code. And yes, millions of people probably have it as their code each year.

Do you mean the pension company used 1257L on a non-cumulative basis on your first payment and then HMRC have issued a code to say continue using that?

Or is just that the pension company used it on your first payment, based on the existing guidance they are meant to follow?

aroominyork

I don't know what they are meant to follow - that is what I am trying to find out. Again, it's whether I'll always be over-taxed on withdrawals and have to get it back on self-assessment. How are withdrawals usually taxed if someone has minimal other income?

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81885942#Comment_81885942

From https://www.gov.uk/employee-tax-codes

"Tax code 1257L

The most common tax code for tax year 2025 to 2026 is 1257L. It’s used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

1257L is an emergency tax code only if followed by ‘W1’, ‘M1’ or ‘X’. Emergency codes can be used if a new employee does not have a P45."