SIPP withdrawal, Tax deducted. Reclaiming....

[Wyneric]

In a previous year, I have taken the whole 25% tax free lump sum from my SIPP.
For the first time this month, I have taken a one off lump sum withdrawal, for which the SIPP provider has deducted the basic rate of tax, even though the total amount taxable will not exceed the personal allowance.

As I normally do a self assessment tax return, and it's the end of the tax year, should I let it come out in the wash in the tax return or claim it back via the online P53 form...?

Next month/tax year, I wish to withdraw the same amount, once again the total will not exceed the personal allowance for the year.
Will I have to wait until the end of the tax year in 2024..?, or can I claim it back straight away using the P53 online form..?

Hope this makes sense...many thanks
Wyneric

[Adamski]

Interested to see responses. I've not done this yet. My guess would be claim via self assessment this time, and next tax year draw the lump sum earlier and claim with P53.

Have you thought about taking regular payments instead then the pension provider should tax under paye and you should get you tax adjusted by them/hmrc in the year without needing to make a claim.

[Wyneric]

Well I did the tax return so should receive the tax rebate in the next few weeks...

Interestingly, on the first day of the new tax year, ie 6th, I received notification from my SIPP provider that HMRC had issued a tax code for the new tax year for exactly the same amount that I drew last month/year, so it looks like I should get the full amount this month with no tax taken off...hopefully...

[Ldak]

I seem to remember it's a P53 to reclaom lump sump tax and a P55 to reclaim flexible withdrawals.

https://www.gov.uk/government/publicati ... mp-sum-p53

https://www.gov.uk/government/publicati ... -claim-p55

I wasn't stopped tax on my 25% lump sums and claimed tax back immediately in year via P55, much easier and took 6 weeks'ish.

[mearnsfool]

Well I did the tax return so should receive the tax rebate in the next few weeks...

Interestingly, on the first day of the new tax year, ie 6th, I received notification from my SIPP provider that HMRC had issued a tax code for the new tax year for exactly the same amount that I drew last month/year, so it looks like I should get the full amount this month with no tax taken off...hopefully...

I'm afraid you do not understand the tax system as it runs these days.

Previously you withdrew "25% tax free money" from your SIPP, all the SIPP providers do not notify HRMC off "25% tax free" withdrawals. Therefore there is no tax to be deducted and sent to HMRC.

As previously you did not withdraw taxable monies there was no need for the SIPP provider to set you up as a person on their "retired taxable payroll!. Now sometime in the 2022/2023 tax year you withdrew taxable monies, not saying that this money was enough to go over the personal allowance but it was taxable, it had to be checked against your tax code.

The SIPP provider would get an emergency tax code in the first instance, that would allow you to receive 1/12 of the personal allowance, I assume if you had no other taxable income that tax year. Therefore in that month you received your taxable payment and you would be allowed £12,570/12, £1,047.50 of income before paying tax.

I assume your gross taxable payment was above £1,045.00 and tax was deducted.

Now in let's say in April 2023 you completed a tax return, that would advise that you paid and let's just put in a figure of £500 tax which was in excess of what you were due to pay HMRC. All that happens is that your personal tax account status is set at £500 credit. It stops there and nothing further happens re receiving a tax return.

It is up to you when you check your personal tax account and if credit is advised, you have then in the account to fill in a request for a tax refund.

My good lady in the 2020/2021 tax year had a £300.00 credit in her personal tax account and after completing her 2021/2022 tax return in April 2022 had the credit increased to £500. She then within the personal tax account applied for a tax refund in the month of May 2022 for £500.

It is now May 2023, no repayment has been made and the personal tax account shows a £502 credit as she has completed her 2022/2023 tax return and she had paid £2.00 too much tax in the 2022/2023 tax year.

I wish you better luck when you apply for your tax rebate but it will not be automatic as you assume.

Just to advise as one poster has, unless you take 12 monthly payments of £1,047.50, in this present tax year assuming you have a £12,570 personal allowance. Then you will be taxed on anything in excess of that monthly allowance or monthly cumulative allowance if taken latter in the tax year. In that case you will have to fill in the P55 form to receive a tax rebate for your 2023/ 2024 tax year.

[SebsCat]

Previously you withdrew "25% tax free money" from your SIPP, all the SIPP providers do not notify HRMC off "25% tax free" withdrawals. Therefore there is no tax to be deducted and sent to HMRC.

Last year, MrsSC crystallised her SIPP with AJ Bell up to the LTA limit. She took the tax free PCLS but didn't withdraw anything else. In April she got a tax coding from HMRC allocating her personal allowance to her previous employer (whom she hadn't strictly speaking left and remained on a zero hours contract so it made sense that the allowance was allocated to them) and zero of the allowance to AJ Bell. So obviously the latter had informed HMRC that she had taken the PCLS or else there wouldn't be any mention of them.

[mearnsfool]

We have been contributing say £2888 net each to our SIPP's sometimes up to £4,000 gross since 2014.

We both withdrew tax free money from our SIPPs a few times circa say £3,000 each time around 2015 /2016.

We received no notice of a tax code, zero value or other wise on our our personal tax accounts. In 2018 the good lady took out some taxable monies from her SIPP and a tax code was allocated to her SIPP on her personal tax account at that point. I have not taken any taxable money out my SIPP but did take tax free money in mid October 2022.

I have just checked my personal tax account and I have a tax code for my defined benefit pension which I have received since circa 2010 and a note of my state pension. Again nothing tax code wise for my SIPP zero or otherwise.

If it makes any difference we have our SIPP's with Hargrieves Lansdown.

Therefore from my experience to date I have no idea why your good lady received a zero tax code, possibly due to her SIPP bring her into the LTA limit. Who knows!

[Eboli]

Ldak noted:

I wasn't stopped tax on my 25% lump sums and claimed tax back immediately in year via P55, much easier and took 6 weeks'ish.

I can confirm the 6 weeks turn around. I made a similar claim (in November 2022) on behalf of a friend and the tax repayment took 6 weeks exactly.

Eb.