Tax codes & UFPLS - how do they work?

bucklb

Hi

I'm currently taking two pensions. One has tax code 1257L and the other a tax code of BR

I plan to take £24k from my SIPP this financial year, by means of one or many UFPLS. Looking at ii's set up I will be charged emergency tax on at least the first payment so I'm reluctant to make a single large withdrawal (on the basis my overpayment of tax 24/25 year wasn't refunded until late November). I'm looking at making 3 withdrawals of £8k each, with the last being just before the end of this tax year.

Given it's late in the tax year I suspect I'll pay emergency tax on each withdrawal (but less tax than if I withdraw as a single lump sum). My concern is what impact this might have on my tax code(s) for next year:

Will my tax code for next year for my ii sipp be based on the assumption that I will continue to withdraw £8k per month, so £96k/year (rather than the £24k I expect to withdraw next year)? Will it impact on the tax codes in use for either of my two existing pensions?

Next year I will probably take another £24k from my SIPP as 6 lots of £4k. Will that mean I'm likely to get another different tax code on the sipp?

Hope this makes some kind of sense

Bob

molerat

Your first UFPLS will be taxed at 1257LX. HMRC will then issue a code, usually within a day or two, which will be dependent on your overall income situation. Next year the code will likely be based on what you have taken overall this year, whether the coding of this year's or next's other income streams are affected depends on your overall tax banding - if it looks like you may stray into 40% tax they may do a band reduction on the current 1257L. You can correct any assumptions made on the incomes in your tax account, including for this year's UFPLS, which can change the codes allocated. You are though leaving it a bit late to get all your ducks in a row this tax year.

bucklb

Thanks @molerat , that helps a lot. Hadn't realised that a new code would be issued so quickly; I'd assumed it would take weeks, if not months. I will be doing my utmost to avoid falling in to the 40% band. I understand that I'm leaving myself with precious little wriggle room to get this sorted, but worst case is probably that I can't get all £24k paid before the end of this tax year which is hardly the end of the world.

Just occured to me - if I get a final UFPLS paid in to my account on 2/4/26 does that definitely count as being within this tax year?

Cheers

Bob

phlebas192

I'm looking at making 3 withdrawals of £8k each, with the last being just before the end of this tax year.

Can't comment on the tax, but the cut-off for requesting a UFPLS is going to be around the middle of March so don't wait until the very end of the tax year!