borofan
Member of DD Central
Posts: 65 
Likes: 13
|
Post by borofan on Dec 16, 2021 11:51:44 GMT
So for about 15 years I've been putting £240 (topped up to £ 300 with tax relief) a month into a SIPP via HL.
I've been choosing aggressive growth funds such as the L&G Global Tech Fund and Ballie Gifford funds and they have done nicely.
I've just turned 53 and am retired. I don't have any income except for about £3k a year from non-ISA investments and don't have a work's pension.
My mortgage is paid off so I have very little outgoings
I have however been putting the full amount in S&S ISAs for a many years now, again in the same growth funds and I have not touched a penny.
Now I know that when I turn 55 I can if I want access 25% of my SIPP tax free, but because I have no (or very little) income can I access the rest tax free, either in a lump sum or paid monthly?
I don't get a state pension (which I take it counts towards your taxable income?) until 67.
So I trying to figure out a way to access the 75% of my SIPP by paying no or very little tax before the state pension kicks in.
If I require anymore money I will access my ISAs.
Opinions please.
|
|
hazellend
Member of DD Central
Posts: 2,361
Likes: 2,179
|
Post by hazellend on Dec 16, 2021 11:59:14 GMT
So for about 15 years I've been putting £240 (topped up to £ 300 with tax relief) a month into a SIPP via HL. I've been choosing aggressive growth funds such as the L&G Global Tech Fund and Ballie Gifford funds and they have done nicely. I've just turned 53 and am retired. I don't have any income except for about £3k a year from non-ISA investments and don't have a work's pension. My mortgage is paid off so I have very little outgoings I have however been putting the full amount in S&S ISAs for a many years now, again in the same growth funds and I have not touched a penny. Now I know that when I turn 55 I can if I want access 25% of my SIPP tax free, but because I have no (or very little) income can I access the rest tax free, either in a lump sum or paid monthly? I don't get a state pension (which I take it counts towards your taxable income?) until 67. So I trying to figure out a way to access the 75% of my SIPP by paying no or very little tax before the state pension kicks in. If I require anymore money I will access my ISAs. Opinions please. You will probably be able to take 12.5k a year out of your SIPP and pay no tax (not including the lump sum). It’s taxed the same way as earned income I believe. Congratulations on your retirement at 53!
|
|
Esmeralda
Member of DD Central
Posts: 106 
Likes: 36
|
Post by Esmeralda on Dec 16, 2021 22:40:38 GMT
I too retired at 53 and this year (I'm now 55) I took my 25% tax free lump sum then set up a regular drawdown of £1,000 per month (I have no other income other than tax-free interest). The first payment was taxed on an emergency code but between them HMRC and my pension provider sorted that out in time for the second payment and now I pay no tax each month. As my annual pension income is £12,000 I will be able to claim back the emergency tax that I paid on the first drawdown payment. My tax code is 1257L so I'm allowed to earn £12,570 before I have to pay income tax but I couldn't be bothered with the odd pounds and pence so opted for a nice round £1,000 a month instead.
If you were to try to access, £12,570 (or a lesser amount) in a lump sum annually you would probably pay emergency tax on it the first time and then have to claim it back (that's why I went for a monthly drawdown). I'm not sure about annual withdrawals after that. I have read that HMRC assumes that your first pension withdrawal each year is a monthly amount so they tax you, but I have no experience of that so can't say for certain one way or the other.
When I'm 67 and I start to receive my State Pension, I will reduce my monthly drawdown amount from my pension so that my total annual income (State Pension and SIPP drawdown) is within my tax allowance. No way will I be paying tax on any of my pension incomes ever again if there's a way around it.
|
|
agent69
Member of DD Central
Posts: 5,600
Likes: 4,185
|
Post by agent69 on Dec 16, 2021 23:23:56 GMT
So for about 15 years I've been putting £240 (topped up to £ 300 with tax relief) a month into a SIPP via HL. I've been choosing aggressive growth funds such as the L&G Global Tech Fund and Ballie Gifford funds and they have done nicely. I've just turned 53 and am retired. I don't have any income except for about £3k a year from non-ISA investments and don't have a work's pension. My mortgage is paid off so I have very little outgoings I have however been putting the full amount in S&S ISAs for a many years now, again in the same growth funds and I have not touched a penny. Now I know that when I turn 55 I can if I want access 25% of my SIPP tax free, but because I have no (or very little) income can I access the rest tax free, either in a lump sum or paid monthly? I don't get a state pension (which I take it counts towards your taxable income?) until 67. So I trying to figure out a way to access the 75% of my SIPP by paying no or very little tax before the state pension kicks in. If I require anymore money I will access my ISAs. Opinions please. I'm in a similar situation, albeit a bit older and a bigger SIPP pot.
I have minimal taxable income, so normally take about £16k a year from the SIPP (which is tax free). I don't want the money, but just trying to get as much out tax free as possible before the full effect of my DB pension kicks in.
Taxation can be a bit anoying, given that the tax man likes taking a slice even though you're below the tax threshold. Last year I had zero taxable income and took £12k +£4k tax free from the SIPP at the end of March. Even though it was obvious that I had no tax liability for the year, the tax man still took 20% off the £12k, which I then had to claim back.
As Esmeralda mentioned, the tax man has a nasty habit of assuming that the first income from each source each year will be replicated every month. So if you don't take 25% of the whole sum tax free to begin with, you can take about £4k lump sum tax free at the begining of the financial year and then £1k a month (which won't get taxed). If you take £16k at the begining of the year (which should't get taxed if it is your only income for the year) the tax man will probably take an axe to it, and you'll have to claim the tax back.
|
|
borofan
Member of DD Central
Posts: 65
Likes: 13
|
Post by borofan on Dec 18, 2021 11:33:47 GMT
Thanks for the replies everyone.
As well as your Personal Allowance can you not take more tax free as part of your free capital gains tax allowance?
Also, once you start taking money from the SIPP, I take it you have to stop paying in the monthly amounts and getting tax relief on it?
So basically you can't get money out and still pay in? (I think you can pay into a SIPP until 75-ish?)
|
|
|
|
Post by overthehill on Dec 18, 2021 13:44:24 GMT
Thanks for the replies everyone. As well as your Personal Allowance can you not take more tax free as part of your free capital gains tax allowance? Also, once you start taking money from the SIPP, I take it you have to stop paying in the monthly amounts and getting tax relief on it? So basically you can't get money out and still pay in? (I think you can pay into a SIPP until 75-ish?)
Everyone has a capital gains tax free allowance, 12300, but it has to be capital based not income or interest i.e. buying and selling property or shares
Anyone who doesn't have any taxable earnings except their pension can contribute 3600 gross to their SIPP every year i.e. 2880 by you and 720 by government/sipp provider. It's called free money.
If you don't have any other earnings you can take 12500 of pension + 6000 of interest + (1000 of dividends) tax free.
|
|
agent69
Member of DD Central
Posts: 5,600
Likes: 4,185
|
Post by agent69 on Dec 18, 2021 14:13:54 GMT
Thanks for the replies everyone. As well as your Personal Allowance can you not take more tax free as part of your free capital gains tax allowance? Also, once you start taking money from the SIPP, I take it you have to stop paying in the monthly amounts and getting tax relief on it? So basically you can't get money out and still pay in? (I think you can pay into a SIPP until 75-ish?)
Everyone has a capital gains tax free allowance, 12300, but it has to be capital based not income or interest i.e. buying and selling property or shares
Anyone who doesn't have any taxable earnings except their pension can contribute 3600 gross to their SIPP every year i.e. 2880 by you and 720 by government/sipp provider. It's called free money.
If you don't have any other earnings you can take 12500 of pension + 6000 of interest + (1000 of dividends) tax free.
I thought that if you had no other taxable income you could take £16,760 from your SIPP without paying tax. 25% (£4190) tax free + 75% (£12570) equal to your tax free amount.
Where does the £6000 of interest come from?
|
|
|
|
Post by overthehill on Dec 18, 2021 17:43:57 GMT
Everyone has a capital gains tax free allowance, 12300, but it has to be capital based not income or interest i.e. buying and selling property or shares
Anyone who doesn't have any taxable earnings except their pension can contribute 3600 gross to their SIPP every year i.e. 2880 by you and 720 by government/sipp provider. It's called free money.
If you don't have any other earnings you can take 12500 of pension + 6000 of interest + (1000 of dividends) tax free.
I thought that if you had no other taxable income you could take £16,760 from your SIPP without paying tax. 25% (£4190) tax free + 75% (£12570) equal to your tax free amount.
Where does the £6000 of interest come from?
I've realised this thread is purely about paying no tax with money extracted from a SIPP only. You also have 6000 of tax free savings interest if 12570 is your total annual income.
|
|
