SIPP drawdown sense check and how do I sort out tax owed?

MoosMum

I'm currently drawing DB pension and when I receive SP in 28/29 I will become HR taxpayer.

I currently have approx £150k in a SIPP and in view of the IHT tax changes coming in the future my thoughts are to draw down £50k in this tax year and the next 2 - I currently have c£100k in the SIPP in cash like funds.

I can get a little out in the 3 tax years at BR tax.

I then plan to move the net SIPP money into ISAs for DH and I.

Does this make sense or have I missed something obvious?

What I don't know or understand is what my position with HMRC. My SIPP provider does flexi drawdown which I have done for small amounts in the past and I'm assuming that they will just deduct BR tax on the 75%, so will I have to notify HMRC or do self assessment for this year and the next 2 years? I'm concerned as I've seen a lot of comments about HMRC using emergency codes and if I can I would rather just pay what I owe.

Thanks in anticipation

Albermarle

I currently have approx £150k in a SIPP and in view of the IHT tax changes coming in the future

Presume you are aware that moving money from a SIPP to and ISA, will have no effect on your IHT liability, after the 2027 changes?

Dazed_and_C0nfused

The emergency code is 1257L.

What code do you currently have for your existing PAYE income?

Why do you think Self Assessment could be relevant?

MoosMum

https://forums.moneysavingexpert.com/discussion/comment/81905104#Comment_81905104

I was aware that there were changes to leaving your untouched pension and that it would in future be taxable for the recipient. As fast as ISAs are concerned yes I know they will be included in your estate thanks

MoosMum

https://forums.moneysavingexpert.com/discussion/comment/81905109#Comment_81905109

My tax code for PAYE is 8300 I think. Rightly or wrongly I asked AI which said as I would become HR taxpayer I might need to register to pay the HR tax. I thought I would get more sense from the good folk on this forum!

molerat

If there is no code currently allocated to the SIPP then they will (must) use 1257LX on the first withdrawal. HMRC will then issue a code as they think appropriate. They may also change the code of your other income stream if they think necessary. Taking further withdrawals may again change those codes. There will be no need for self assessment, HMRC will claim any tax via changed codes or simple assessment (a bill).

MoosMum

https://forums.moneysavingexpert.com/discussion/comment/81905125#Comment_81905125

The code for my SIPP is currently 5000

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81905146#Comment_81905146

Do you mean 500T?

5000T (or 5000L) would be highly unusual.

molerat

https://forums.moneysavingexpert.com/discussion/comment/81905146#Comment_81905146

It will also show the amount they expect you to draw in the year. If you change that to the actual amount you will draw in the tax year - and make sure the other income stream is correct - they will change codes to accommodate that amount so that hopefully the correct tax is collected by end of year, to achieve that you will need to take a draw in March of the appropriate year.

MoosMum

https://forums.moneysavingexpert.com/discussion/comment/81905154#Comment_81905154

Sorry 500t I took out 5k last year

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81905315#Comment_81905315

So the first £417/month will be paid with no tax deducted. And basic rate on the next £3,142/month.

Do you expect your main pension (in HMRC's eyes) to pay as much as £8,300 in 2026/27?