Tax code for SIPP withdrawal

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81886258#Comment_81886258

That seems to add up. On Salary Calculator if I enter a salary of £13700*12=£164,400 and a tax code of 1257L (or LX), the tax deduction is £4543 which is the amount deducted by ii.

https://forums.moneysavingexpert.com/discussion/comment/81886353#Comment_81886353

So if I get a message that my tax code has been updated from 1257LX, I will draw £100 and see what I receive.

molerat

If the code showing in your tax account is 1257LX then that is what HMRC have decided is correct for your circumstances and it will not change without some intervention. You need to check that any income sources shown have the correct estimated annual income and if you want to take more from that pension change the estimate to the total expected amount for the year and see what happens. If the code doesn't change you will need to contact HMRC to get it changed. The alternative is to submit a reclaim P5? series form. https://www.gov.uk/claim-tax-refund

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81886502#Comment_81886502

Curious, given my online account says estimated tax for this FY is £226. I will phone them.

Linton

https://forums.moneysavingexpert.com/discussion/comment/81886528#Comment_81886528

HMRC does not know how much you will be paid in the remaining months of the year. The best estimate for PAYE income is to simply scale up your income from the PAYE system to date in the current year and calculate the appropriate tax. So in your case it will be assuming a higher pension drawdown than you have so far taken.

I cant see any point in phoning them - HMRCs estimate would seem to be for information only and not directly affecting anything.

aroominyork

I phoned HMRC. ii informed HMRC late in the day that I was making a first withdrawal, hence ii used non-cumulative coding. While on the call he updated my code to cumulative for this and next tax years. Once it goes through (a week or two) I would probably get the overpayment back if I make another SIPP withdrawal. He advised that if I make a withdrawal early in FY27 it will assume I am making the same withdrawal each month and will over-tax me, but I can make a P53 in-year claim to get the tax back.

molerat

ii informing HMRC "late in the day" has nothing to do with anything, the rules state that a first payment will be taxed at 1257LX unless a code is already in place and there is no way to get a code in place unless a return has been submitted or a P45 used. The new tax code should show in 48 hours, usually less. On a cumulative code you have 1/12th of the annual coded allowance per month accumulating over the year and will not get the full use of that allowance until M12 - March. So taking a total of more than the relevant multiple of 1/12ths any time in the year will result in you being "over taxed" but taking a final payment in March will square the tax and automatically refund anything overpaid.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81886879#Comment_81886879

Yup, I was surprised by 'late in the day' since I had read that first withdrawals are always X. Anyway, I have got there. Thanks all - much appreciated.

aroominyork

Just to close this loop, having received £9156.80 on my first taxed SIPP withdrawal of £13,700 and then spoken with HMRC to get a cumulative tax code, I made a second withdrawal of £600 and received £4799.20. So overall I was taxed £344 on withdrawals of £14,300 and a final adjustment will be made in self-assessment.