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SIPP Drawdown and HMRC

pds2008
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SIPP Drawdown and HMRC

#202062

Postby pds2008 » February 18th, 2019, 12:09 pm

Hi

I will shortly be moving a SIPP and AVC into Drawdown, taking the tax free cash and then looking for a modest income from the remainder of around £10k per annum. I am 55 and am not working with no real plans to do so do not expect another source of PAYE income - plus I have not worked since the tax year 2017/8. ( I have other means of income which are through dividends - mostly ISA protected). My SIPP provider tell me that once I move into drawdown they will tax at source, at first using an emergency code, and then with whatever code the HMRC provides. I understand why they have to do this but I am not sure about how the HMRC will code me and what this means to my income from Drawdown.

Hope this makes sense

Yell

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Re: SIPP Drawdown and HMRC

#202067

Postby EssDeeAitch » February 18th, 2019, 12:24 pm

pds2008 wrote:Hi

I will shortly be moving a SIPP and AVC into Drawdown, taking the tax free cash and then looking for a modest income from the remainder of around £10k per annum. I am 55 and am not working with no real plans to do so do not expect another source of PAYE income - plus I have not worked since the tax year 2017/8. ( I have other means of income which are through dividends - mostly ISA protected). My SIPP provider tell me that once I move into drawdown they will tax at source, at first using an emergency code, and then with whatever code the HMRC provides. I understand why they have to do this but I am not sure about how the HMRC will code me and what this means to my income from Drawdown.

Hope this makes sense

Yell


The tax deducted at source by my (then ) SIPP provider was refunded within four weeks or so by HMRC - they were very efficient. However, I did (via an accountant) submit whatever documentation was required to get the tax code sorted out at the start of the process.

My suggestion would be to pay an accountant to submit the relevant documents (sorry, I can't provide details on what documentation is required) to your SIPP provider, it is not expensive.

swill453
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Re: SIPP Drawdown and HMRC

#202068

Postby swill453 » February 18th, 2019, 12:29 pm

I don't think you need to do anything yourself. You'll likely get a tax code giving you the full personal allowance tax free (£11,850 this year). This will happen automatically after the SIPP provider informs HMRC of your first month's drawdown.

If they've deducted tax in the first month because of the emergency code, it will be automatically refunded through the "payroll" system.

Scott.

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Re: SIPP Drawdown and HMRC

#202075

Postby Alaric » February 18th, 2019, 12:38 pm

swill453 wrote:If they've deducted tax in the first month because of the emergency code, it will be automatically refunded through the "payroll" system.


If over a whole year, there was no tax to pay because of the personal allowance, wouldn't the month 1 deduction have to be refunded directly? I think there's even a form request this.

I wonder whether the Chancellor or civil servants are going to cotton on that the combination of high personal allowances and pensions drawdown freedom allows early retirement to be financed at the expense of other tax payers by virtue of the tax relief given on the way in to a SIPP and not clawed back on the way out.

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Re: SIPP Drawdown and HMRC

#202106

Postby swill453 » February 18th, 2019, 2:11 pm

Alaric wrote:I wonder whether the Chancellor or civil servants are going to cotton on that the combination of high personal allowances and pensions drawdown freedom allows early retirement to be financed at the expense of other tax payers by virtue of the tax relief given on the way in to a SIPP and not clawed back on the way out.

Maybe. This year I took a UFPLS payment of £15,800, entirely tax free. My wife similarly had a taxable income of exactly the personal allowance.

Them's the rules.

Scott.

Dod101
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Re: SIPP Drawdown and HMRC

#202116

Postby Dod101 » February 18th, 2019, 2:45 pm

I am in a similar position as the OP except that I have a State pension which is paid gross but which is taxable. I would do nothing. Just accept whatever tax code they give you. Your SIPP manager will deduct tax according to that code, but other income such as dividends and in my case the State pension is paid to me gross. I make a submission to HMRC at the year end under self assessment and either pay more tax or get a refund after that. It all come out in the wash.

Dod

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Re: SIPP Drawdown and HMRC

#202228

Postby Arborbridge » February 19th, 2019, 7:24 am

My case was the same as Dod's. Unless you have some quite complex affairs, there is absolutely no reason to pay an accountant. The process is quite straighforward using a SIPP provider who will liaise with the HMRC.
Things might take a while to work through or settle down, but that's not a problem.


Arb.

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Re: SIPP Drawdown and HMRC

#202233

Postby Chrysalis » February 19th, 2019, 7:53 am

This is a common and recognised issue when starting drawdown or UFPLS payments. If you have had too much tax deducted you can claim the rebate immediately from HMRC, this link on Pensionwise will take you to gov.uk where you can download the appropriate form:
https://www.pensionwise.gov.uk/en/tax

xxd09
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Re: SIPP Drawdown and HMRC

#202254

Postby xxd09 » February 19th, 2019, 9:31 am

Been in this position for a few years
Tax is deducted at source by your SIPP provider at an emergency rate
Workout what your tax should be
If been overtaxed-reclaim by filling in a R55 form- can be done online
Excess tax back to you in 4 weeks
xxd09


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