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Drawdown whilst still working and tax implications

gonedownthepub
gonedownthepub Posts: 93 Forumite
in Pensions, annuities & retirement planning
Hi
I am currently working full time with salary circa £34k but wish to reduce my hours next year when I am 56 years old.
I have already taken my 25% tax free lump sum from my SIPP to invest in other property to help my daughter get on ladder.
On reducing my hours I shall be about £350 /month worse off ,I intend to make up the shortfall by drawdown of that amount each month.
I am interested in the tax implications as I believe HMRC will give me an emergency tax code.
So who gets this new tax code ,the pension provider or my employer?
Will there be any advantage in just taking £1 in the first month so HMRC assume this will be my monthly drawdown and issue tax code on that amount?
Thanks
«1

Comments

  • AlanP_2
    AlanP_2 Posts: 3,553 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Not at that stage so can't comment on tax code but remember if you take any taxable income from a SIPP / DC pot you are limited to £4k a year pension contributions.
  • Linton
    Linton Posts: 18,486 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Your first ever taxable drawdown will be taxed by the platform using a general emergency tax code specified by HMRC. HMRC will then issue a new taxcode to the platform to be used for subsequent drawdowns - each source of income has its own taxcode. This should result in you paying the correct tax by the end of the tax year.


    Once the taxcode has been issued you will have the opportunity to move your tax allowance allocation between your two sources of income should you wish. Overall it wont make any difference to the tax you pay.
  • gonedownthepub
    gonedownthepub Posts: 93 Forumite
    AlanP wrote: »
    Not at that stage so can't comment on tax code but remember if you take any taxable income from a SIPP / DC pot you are limited to £4k a year pension contributions.
    Thanks my wife does not have a sipp yet and I assume I can open another sipp which allows full contributions?
  • dmelife
    dmelife Posts: 133 Forumite
    100 Posts Third Anniversary Combo Breaker
    No you can’t, the £4K limit will apply to any pension
  • Linton
    Linton Posts: 18,486 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    gonedownthepub wrote: »
    Thanks my wife does not have a sipp yet and I assume I can open another sipp which allows full contributions?


    The £4K limit applies to the total of both your contributions and your employers contributions to any of your DC pensions. Is your employers pension DC? You could put money into your wife's SIPP within the various limits but she would get the tax relief.
  • Paul_Herring
    Paul_Herring Posts: 7,484 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    gonedownthepub wrote: »
    Thanks my wife does not have a sipp yet and I assume I can open another sipp which allows full contributions?

    If you open it for yourself, you'd still be restricted to £4K.

    If you open it for your wife, contributions will be restricted to whatever her circumstances are.

    e.g.
    - if she's not working then it's limited to £3.6K,
    - if she's working then up to her gross salary.
    - If she herself has already taken more than the 25% from any DC pensions, then like you she'll be restricted to £4K (subject to salary - see point above)
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • xylophone
    xylophone Posts: 45,913 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Is your wife earning?

    If so, does she have a workplace pension?
  • gonedownthepub
    gonedownthepub Posts: 93 Forumite
    Hi yes she works and has civil service db pension and no SIPP.
  • xylophone
    xylophone Posts: 45,913 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    https://www.standardlife.co.uk/c1/guides-and-calculators/managing-your-pension-annual-allowance.page
  • FatherAbraham
    FatherAbraham Posts: 1,036 Forumite
    Part of the Furniture 500 Posts Photogenic Combo Breaker
    gonedownthepub wrote: »
    I have already taken my 25% tax free lump sum from my SIPP to invest in other property to help my daughter get on ladder.

    That's not an investment, it's a donation (or a combination of a donation with an investment).
    Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...
    THE WAY TO WEALTH, Benjamin Franklin, 1758 AD
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