Income tax on pension

[-Cappo-]

I probably know the answer to this but it's worth a sanity check.

Assume someone has a SIPP from which they have previously withdrawn the 25% tax free amount.

If they then wanted to draw an annual income which exceeded the £50,270 tax threshold (ie fell into the 40% tax bracket), is there any way to mitigate that? For example transferring an amount to a different type of accessible account (GIA, ISA, something else)? Or some other means? Or is it simply a case of paying the 40% where applicable?

I guess there's not but as above, thought I'd check.

Thanks.

ETA - for clarity, the tax concessions for terminal illness wouldn't apply in this situation.

Edited by -Cappo- on Tuesday 16th July 17:23

[gareth h]

I don’t think there is anyway to avoid it, unless you reduce your income.

[omniflow]

If the SIPP holder has a non-working Spouse (or a Spouse that doesn't earn very much) then they could get divorced and give their Spouse 50% of the SIPP as part of the divorce settlement. Or they could die before age 75 and pass the entire SIPP to their Spouse, who can then access the entire SIPP tax free.

Obviously neither suggestion is serious, but it does highlight one of the downsides of the whole "put everything into your pension to avoid paying tax now" approach. You will pay tax on the way out. 20% isn't too painful, but that means you need to live on £3,500 / month. If you need more than that, then you're into 40%.

[BAMoFo]

^^^^ If the OP is fortunate enough to have a pot large enough to pay that much out per year it is highly likely that he was offsetting a substantial chunk of tax at 40% on the payments into the pension.

[alscar]

You can mitigate some of the tax paid from drawdown by way of EIS or equivalent type tax relief investments but of course that also means having money elsewhere to actually make the investment.
In fairness you should also not invest in them just to gain the tax relief but more so because of the other advantages of the investment.