UFPLS P60 Sanity Check

MetaPhysical

Hi all,

About to take my first UFPLS payment at the start of the new tax year next week from my as yet untouched SIPP.

If I wanted to take a total of £30k out of my pot via UFPLS in the year spread over several payments, what will go down on my P60 towards my gross income? Will it be the £30k or will it be the £30k minus the 25% tax free amount - ie. £22500 ? I want to structure my UFPLS income so that combined with my other DB pensions I remain inside the 20% tax band and remain a BR tax payer.

I will take a small initial UFPLS of £100 to trigger HMRC applying the correct tax code before I take a larger amount.

Many thanks.

NoMore

it’s tax free, it won’t appear on your p60 and does not increase your taxable account income.

LHW99

AFAIR (this was with II) my OH got a "payslip" after his single UFPLS, which detailed the taxable part, plus the tax paid. I don't think there was a PL60.

It said at the bottom:

"PLEASE KEEP THIS PAY ADVICE IN A SAFE PLACE.
IT MAY BE REQUIRED FOR THE PURPOSE OF YOUR SELF-ASSESSMENT RETURNS OR OTHER TAX PURPOSES."

The TFLS part of the UFPLS is just that - tax-free, it's irrelevant to how much tax you pay, which is based on the taxable 75% +other income +any savings interest etc.

dunstonh

If I wanted to take a total of £30k out of my pot via UFPLS in the year spread over several payments, what will go down on my P60 towards my gross income?

Anything you draw against the 75% element as that is the only bit that goes through payroll. The 25% TFC doesn't go through payroll.

MetaPhysical

Thanks folks. Appreciate your feedback. I have another question if I may.

So lets say I am trying to keep within the 50270 BR band. I can manipulate my UFPLS withdrawals in order to do that as we discussed above.

If you have any income from savings (outside an ISA) in what order does that get added to your total income or am I over thinking this? Do they just add it to all other forms of income as a whole??

For example.

let's say my aggregate income is £50000 from all income sources other than savings interest.

I then get savings interest of £750. That would take me above the 50270 limit. How do HMRC say proportion what gets taxed at 20% and what gets taxed at 40% on that savings income - because some of it was below and some above the BR threshold? Or is that looking too much into it - they just add the 750 and period, you are a 40% tax payer and taxed accordingly on the bit above 50270

This small bit that takes you over the 40% has far reaching consequences for things like CGT etc.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948514#Comment_81948514

In your example the first £500 would be taxed at 0% and that would use what was left of your basic rate band and the first part of your higher rate band.

The remaining £250 would be taxed at 40%.

And yes, it can have consequences, loss of Marriage Allowance for example. And CGT impacts as well.

NB. If you have included dividend income in the £50k that would alter things

DRS1

I am intrigued no-one has talked about tax codes. If you are already receiving a DB pension that will have a code (1257L?). The UFPLS payments will get a second code but what will that be? BR? Or maybe the 1257L code gets split between the two sources?

If you have taxable savings interest that will get factored into one of the codes (perhaps the DB one?) A year or two behind the times perhaps. Or maybe you get a simple assessment to pay the tax on that in one go.

DRS1

You asked about the order of income sources for tax purposes. Savings interest comes after pension income. I am not sure how it is being changed but there is a change of some sort coming with the split in basic rate tax so that income sources charged at the 20% basic rate level will be taxed (and use up the personal allowance) before those charged at the 22% basic rate level (like savings interest).

DavidT67

https://forums.moneysavingexpert.com/discussion/comment/81948777#Comment_81948777

How HMRC allocates tax codes doesn't change how much tax you owe, nor ensure that they will actually collect the correct amount overall. Completing a tax return ensures you pay what is due and no more.

Albermarle

 If you are already receiving a DB pension that will have a code (1257L?). The UFPLS payments will get a second code but what will that be? BR? Or maybe the 1257L code gets split between the two sources?

The personal allowance can be split between two ( or more) sources, or just onto one, with BR for the others. I have the impression with HMRC there is no set procedure and it can go either way. However if you want to change it you can call them and request that.

I think though the OP could well confuse HMRC by making multiple ad hoc withdrawals in a year. Also every time you withdraw a UFPLS, you have to go through a process with the provider ( some more than others). That is why many posters on here prefer to take out one ( or maybe two) UFPLS payments a year. and put the money in an easy access savings account, for withdrawal when needed. Less hassle .

cc123mm456

https://forums.moneysavingexpert.com/discussion/comment/81948789#Comment_81948789

See this HMRC link:

https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-dividend-income/changes-to-tax-rates-for-property-savings-dividend-income

The relevant section:

7. What do the changes to the ordering of reliefs and allowances mean?

The income tax ordering rules will be changed from April 2027 so that the Personal Allowance will be deducted against employment, trading or pension income first.

This does not impact use of specific structural allowances, including the dividend allowance, personal savings allowance and property allowance.

and this link (worded slightly differently):

https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income

The relevant paragraph:

Use of Allowances and Reliefs:

Legislative amendments will be made to the Income Tax calculation so that general reliefs and allowances will only be applied to property, savings and dividend income after they have been applied to other sources of income. Reliefs and allowances for specific types of income will still apply to those types of income first where relevant.