SIPP Tax question

[Ruskie]

Can withdraw 25% tax free next year or pay tax on withdrawing the full amount. If I take the full amount how is the tax calculated and paid? Is it a lump sum deduction or is it absorbed into my tax code and paid over the year? Thanks.

[PurpleMoonlight]

If the pension pot is under £10,000 then 25% is tax free and the rest taxed at 20%.

If the pension pot is more than £10,000 then 25% is tax free and the rest taxed at the emergency tax rate - 1100L M1.

However, in either case this just the tax deducted at time of payment. The eventual liability is assessed at the end of the tax year based on your overall income. If you believe a refund is due though you can apply for that immediately.

[Ozzie Osmond]

If you're "pulling all the money out" then make VERY sure you DON'T get hit by 40% tax, which is what can happen if you try to pull out too much at the same time. If there's serious money in there, make sure you spread it forward a few years to suppress tax to 20% (if possible).

[Ozzie Osmond]

Just to emphasise yet again the pensions "dream ticket",

• 40% tax relief paying in to the pot
• pot accumulates over time completely tax free
• 25% of the pot comes out completely tax free
• no more than 20% tax on the rest.

^^ Although not everyone is able to hit this dream ticket it is potentially available to a lot of people.

[Jockman]

Ozzie Osmond said:

Just to emphasise yet again the pensions "dream ticket",

• 40% tax relief paying in to the pot
• pot accumulates over time completely tax free
• 25% of the pot comes out completely tax free
• no more than 20% tax on the rest.

^^ Although not everyone is able to hit this dream ticket it is potentially available to a lot of people.

I suppose you could add - available from 55 years old?

[Ruskie]

Thank you for the replies.

It's only about £20k. Salary is around £35k.

So £5k of the £20k would be tax free then 40% on the £15k when it goes above the threshold into 40%?

[PurpleMoonlight]

Ruskie said:

Thank you for the replies.

It's only about £20k. Salary is around £35k.

So £5k of the £20k would be tax free then 40% on the £15k when it goes above the threshold into 40%?

Cash in £10,000 either side of 6th April.

[Ozzie Osmond]

PurpleMoonlight said:

Cash in £10,000 either side of 6th April.

^^^ This

[Ruskie]

Thats very useful to know. Thank you.