Tax and Drawdown

montventoux · 28 February at 8:54AM

My DW will earn circa £5k from her savings (ex ISAs) in tax year 25/26 which will be tax free as covered by the £5k starter savings allowance.

Her tax code for 25/26 is C1131N and she has utilised her personal allowance and withdrawn £11,310 from her crystallised DC pension pot.

However, she's been taxed £187 in tax when I was expecting zero. What am I missing?

Thanks.

Dazed_and_C0nfused · 28 February at 8:57AM

Did she make Gift Aid donations?

In exactly what way has "been taxed"?

A P800 or Simple Assessment calculation?

A tax code for this year. Or next year?

A deduction made by her pension payer?

Dazed_and_C0nfused · 28 February at 9:05AM

Actually, ignore that, I would be fairly confident that what you're missing is that we are currently in February.

Linton · 28 February at 9:09AM

Also, drawdowns are taxed under PAYE hence the tax allowance is accumulated month by month over the tax year. As she withdrew the money before the end of the tax year she would not have had access to the full tax allowance.

HMRC will repay any excess tax at the end of the tax year when her full tax position is known.

Dazed_and_C0nfused · 28 February at 9:11AM

https://forums.moneysavingexpert.com/discussion/comment/81903203#Comment_81903203

Or, if her pension provider will allow it, she could take another £1 (taxable) pension in month 12 and then the pension company will refund it all when they pay that £1 😉