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Where Taxpayers and Advisers Meet

Pension withdrawal

Bipman
Posts:4
Joined:Mon Nov 06, 2023 10:25 am
Pension withdrawal

Postby Bipman » Mon Nov 06, 2023 10:34 am

Hi

This is probably a really simple question but I can't get my head round it. I earn £48000 a year and have a tax code of 1257L as you would expect. If I want to withdraw say £40000 from my pension (having already take the 25% tax free lump) then I presume I would lose 40%. The bit I don't understand is will my tax code change i.e. go to 0L ?

Bipman

someone
Posts:686
Joined:Mon Feb 13, 2017 10:09 am

Re: Pension withdrawal

Postby someone » Mon Nov 06, 2023 2:11 pm

You don't have "a" tax code, you have a tax code per employment (which includes pensions)

So, yes, it's probable that your pension income will get a code similar to 0L. (Note that by default you might also end up with a 1257L code on the pension income - but then you'll have to tell HMRC and pay the tax later anyway - and eventually they'll notice if you don't tell them)

Bipman
Posts:4
Joined:Mon Nov 06, 2023 10:25 am

Re: Pension withdrawal

Postby Bipman » Mon Nov 06, 2023 2:23 pm

Aha. Can I not just pay the tax owed immediately?

Bipman

pawncob
Posts:5083
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Pension withdrawal

Postby pawncob » Mon Nov 06, 2023 4:51 pm

God bless you Sir. Every little helps.
With a pinch of salt take what I say, but don't exceed your RDA

Bipman
Posts:4
Joined:Mon Nov 06, 2023 10:25 am

Re: Pension withdrawal

Postby Bipman » Mon Nov 06, 2023 5:10 pm

Just saves time really.

Bipman

D&C
Posts:149
Joined:Mon Nov 25, 2019 11:35 pm

Re: Pension withdrawal

Postby D&C » Mon Nov 06, 2023 6:57 pm

The pension company should use the emergency tax code (1257L) on the first payment and the tax which would be deducted from £40,000 would be £16,378.20.

Which wouldn't be that far off what is due for someone with not much basic rate band left.

You would likely get a (relatively) small refund once the tax year has finished. Automatically without having to fill in any forms.

The above assumes you have no other taxable income not previously disclosed and wouldn't become liable to the High Income Child Benefit Charge.

Bipman
Posts:4
Joined:Mon Nov 06, 2023 10:25 am

Re: Pension withdrawal

Postby Bipman » Mon Nov 06, 2023 7:34 pm

Thanks everyone for the help.

Bipman


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