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Reclaiming Tax in Drawdown
Comments
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Also interested in this question, as I intend to use my SIPP to only cover 5 years so essentially on commencement of drawdown it will be mostly cash earning almost zero interest in the SIPP. Getting it out ASAP as tax efficiently as possible is my aim.
HL would be one of the cheapest SIPPs for this.0 -
I think SeaShell's plan is to effectively 'move' investments worth £12,500 from her SIPP each year into her S&S ISA. So I think it makes sense to withdraw the full personal tax allowance in one transaction each year from the SIPP and reinvest it immediately in the S&S ISA.AnotherJoe wrote: »“
But you can leave it invested in the same investments in the pension and withdraw more slowly.0 -
Will it make any difference if the investments are the same?
eg say SS is invested in Acme in the SIPP, takes out 1/12 each month and reinvests in Acme in an ISA.
For many investments there wont be any additional costs, especially funds.
For some, mostly shares, there will be transaction charges though even those would be much lower if it were a regular investment they set up.
So it would depend what the investments were.0 -
AnotherJoe wrote: »Where is the money now if its not in a SIPP? Or are you looking to move it to a different SIPP?
The pensions are ex. employers schemes, with Aviva and Aegon. DH has changed the underlying funds in which the investment are, so does this make them SIPP's by definition?
We plan to consolidate these together and then put the whole pot into drawdown. Provider and platform yet to be decided on....hence the questions.
He wants to get all the money out in 10 years, because he has DB pensions that kick in at 65. Actually it'll be over 9 years, as he has a couple of small pots to take year 1, as they'll just come under his PA.How's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)0 -
I think SeaShell's plan is to effectively 'move' investments worth £12,500 from her SIPP each year into her S&S ISA. So I think it makes sense to withdraw the full personal tax allowance in one transaction each year from the SIPP and reinvest it immediately in the S&S ISA.
Yes, exactly this. We may even move the money to exactly the same investment, just within the ISA wrapper rather than Pension.
This way we pay minimal tax (none) and then can withdraw from the ISA whenever we like, without paying any tax. If the money is left to grow in the pension, its going to take longer to withdraw!!How's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)0 -
Going back to my original question....
Does any one know if you can use form P55 to reclaim tax in subsequent years, after the initial years withdrawal?
Many thanksHow's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)0 -
midlandsimon wrote: »Pension income is taxed under PAYE as earned income. If your providee had a P45 for the current tax year from your previous pension provider, or if they already have your tax code on file, then they will apply that tax code. If not, then HMRC require them to tax your income using the temporary rate until they issue them with a correct tax code.
The temporary (or emergency) rate for the 2019/20 tax year is 1250L (S1250L in Scotland).
The temporary rate works on what is known as a ‘month 1’ basis. This means that the calculation used will have only allocated 1/12th of your tax free personal allowance to your lump sum. They are required by HMRC to use this calculation even if the lumpsum is the only payment made in that tax year.
If you’ve overpaid tax, your provider is not allowed to make ad hoc tax refunds.
HMRC may decide to tell them to amend the tax on your future income payments to correct your tax position. Alternatively, HMRC could review your tax paid at the end of the tax year and issue a tax calculation to adjust your position. In some circumstances you may be able to make an in year claim to get back any overpaid tax.
If the lump sum payment:
•used up your pension pot and you have no other income, complete form P50Z
•used up your pension pot and you have other taxable income, complete form P53Z
•didn’t use up your pension pot and you’re not taking any more payments from the plan in this tax year, complete form P55
•didn’t use up your pension pot, then any further income payments will carry on being taxed under the current tax code unless HMRC issues your provider with a revised tax code.
My bold....basically can this be done annually?How's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)0 -
Going back to my original question....
Does any one know if you can use form P55 to reclaim tax in subsequent years, after the initial years withdrawal?
Many thanks
Not answering your question directly, but in my experience you don't have to reclaim tax in subsequent years, assuming you've not got income elsewhere.
Once you've made the intial withdrawal and HMRC become aware then they'll allocate your tax allowance to the SIPP provider and - as long as you say that you only intend to make the one withdrawal per year - the following withdrawals will have your tax code aplpied and so there'll be no tax deducted.
At least thats what I've found has happened in my case (with AVIVA).0 -
By what mechanism would they deduct no tax on a £12500 withdrawal in month 1, is there a special system for one off annual payments ? I would have thought the only way to do it would be in M12. We are working on taking MrsM's £3600 next year in M3 for that reason.0
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[FONT="]Sorry about this, virtually everyone is not answering the question.[/FONT]
[FONT="]Tax year 2011 2012 until now we are running a limited company and in most years paid ourselves around £7000 to £8,000 a year.[/FONT]
[FONT="]My good lady had her full tax code allocated to the limited company.[/FONT]
[FONT="]2018 2019 we had no income from the limited company as planned but the £11,850 PA for the good lady was allocated to the limited company employment.[/FONT]
[FONT="]After 6th April 2018 she withdrew a taxable lump sum of £9,400 from her SIPP and £1,000 from the taxable portion of a small pot occupational money purchase pension that closed that small pot pension.[/FONT]
[FONT="]The result was a large amount of tax on the pensions. The tax rebate form was filled in and within a month the tax rebate was in our bank account, thank you very much HMRC.[/FONT]
[FONT="]In March 2019 a £120 a month Council pension started to be paid to her, no tax code was allocated to this pension, therefore she was taxed on it.[/FONT]
[FONT="]This was sorted in April for last year when we did her tax return.[/FONT]
[FONT="]In late May 2019 HMRC allocated for the 2019 2020 tax year £9,400 of her tax code to the SIPP therefore they were expecting last year’s withdrawal to be similar each year, £1440 of her tax code was allocated to the Council pension and the remainder of the tax code to our limited company.[/FONT]
[FONT="]She withdrew £3,400 in September 2019 from her SIPP in order not to have to get into paying and applying for a tax rebate. Like MKs M in the previous post.[/FONT]
[FONT="]She got her £120 a month from the council pension taxed starting mid-April at the zero tax code but sorted in the June payment as the tax code was then properly allocated.[/FONT]
[FONT="]In August 2019 she started receiving her state pension.[/FONT]
[FONT="]Her council pension is now taxed at BR to claim back tax on her state pension. Therefore, a tax deduction in September.[/FONT]
[FONT="]Her SIPP tax code is still £9,400 but we will only withdraw the £3,400 to keep her from paying tax.[/FONT]
[FONT="]The tax code allocated to our limited company is a K code and that adds something like £5,500, not the correct number to what she is paid or in this case is not paid!!!!!!!!! In order to claim back tax on her state pension.
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[FONT="]We will have to phone HMRC ask them and reduce her tax code on her SIPP, increase the tax code allocated to her Council Pension back to £1,440. [/FONT]
[FONT="]At best you can phone HMRC at the start of February each year and try to get them to sort out your tax codes for the next year as they will not know what amounts you will withdraw from your SIPPs in April of the next tax year.
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[FONT="]Even then you will still have to fill in a tax refund application at the end of April to sort out your tax rebate if you do an annual pension payment in a lump sum.[/FONT]
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[FONT="] Then when your State Pension starts it has to be sorted again.
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[FONT="]About as clear as mud I would say.[/FONT]0
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