Would tax be deducted by pension provider/hmrc even if client below personal allowance?

[Spiddy]

Hi, Am glad to have found open public forum for tax questions (for neighbour).
Has small private pension and only route that makes sense is a drawdown (currently on means tested benefits so any pension payments or annuity would decrease their income £ for £. Decided drawdown is best way forward on as and when needed basis).
Understands that any small lump sum withdrawn and paid into account classed as capital (as long as under £6k no difference made to benefit income). 
But question(s) is regarding tax!
Income for tax as shown on his P60 is around £6000. Tax code is the general 1257l. So has around £6/7k year before any taxshould be deducted. 
2 part query:
1) On the first 25% withdrawn as drawdown, no tax paid. Is it likely that pension provider will take tax/emergency tax at source & notify hmrc? 
Or is this first 25% paid direct into account no tax taken? Are pension providers aware of clients NINO and P60 details for tax purposes?
2) On the next amounts to be withdrawn/drawdown, understand that these amounts should be taxed at income tax rate of 20%(?) but if the amount withdrawn does not take client over the personal allowance limit, will this still be paid into account tax free? Or are hmrc made aware and tax taken but client has to make tax refund
claim?

Any further advice gratefully recieved.

[D&C]

1. Are you referring to the 25% tax free lump sum? If so then no tax would be deducted as it is tax feee.

2. The first taxable payment would have the emergency tax code (1257L) applied and tax would be deducted on anything above £1,048. This will be automatically refunded by HMRC in due course if it is more than is due. Or a claim can be made by your neighbour (but this isn't necessary unless they are keen for a quicker refund).

There are special rules if this is small enough to be taken as "small pot" and 20% tax would probably be taken initially if that was the case.

If it isn't taken as a "small pot" then MPAA would come into play and this might be an unwelcome factor.

[Spiddy]

Hi D&C, Thank you for your reply on behalf. I have shown answers and:

1. Yes. This is in regard to the 1st 25% taken from private pension (approx amount is £13k hence benefit comments in original post). This 1st payment would equate to something around £3-3500. So this would be paid direct into his account from pension provider, in full, no tax deducted, therefore no need to worry about emergency tax and having to reclaim or wait for this to be returned by hmrc. That's understood & will explain.

2. Had to copy to get straight in my brain! '2. The first taxable payment would have the emergency tax code (1257L) applied and tax would be deducted on anything above £1,048. This will be automatically refunded by HMRC in due course if it is more than is due. Or a claim can be made by your neighbour (but this isn't necessary unless they are keen for a quicker refund).
The 2nd amount won't be taken in same year as the 1st 25%. Why would the first taxable amount have 'emergency' tax code, 1257L, as this is his actual tax code? Also why would tax be deducted on anything above £1048 (where is this figure obtained?) And why would tax be deducted if he is well below his tax allowance as taxable income is £6500 approx, way below £12,570 limit? I apologise for these extra questions, but clearer it is in my mind, easier is will be to explain!
I get that there would probably be automatic tax refund in due course, if tax is taken. I am struggling with part that if his current taxable income £6500, over £6k left, and 2nd payment and even 3rd and then last payment in years to come, would be well under this £6k allowance, why would tax be taken, only for it to be refunded/returned?
Many thanks for putting up with these additional points and questions, and for being a pain. Certainly teaching me a few things too.

[D&C]

With one or two exceptions the emergency tax code is always used on the first taxable payment taken from a personal pension.

The tax code (1257L) is operated on a non cumulative basis and most pension companies tend to operate monthly payroll systems so 1257L gives £1,048 tax code allowances for a payment made where the payment frequency is monthly.
NB. This does not mean there is an expectation he will be paid the same amount month after month, just that the pension company operate a monthly payroll system.

If he wanted to try a different approach he could take part of the taxable element first, say £1,048, and then no tax would be deducted and HMRC would allocate a tax code to the pension company, probably giving all of his spare tax code allowances. So he might have a code of say 650L against his existing job/pension and 607T against the pension so he could take additional amounts without paying as much tax.

Also, you do need to be crystal clear about the taxable/tax fee elements. With pension flexibilities you can, if you wish, take 25% TFLS as part of each payment instead of taking it up front so saying he will take 25% first doesn't mean it won't be a mix of taxable and tax fee income.

[Mateusz199]

those first 25% you withdraw as drawdown are indeed tax-free. but often the pension provider will still take emergency tax because they assume the worst. they should then notify HMRC, but initially, you might see a higher tax deducted. it's best to contact the provider directly to make sure how it works with them. they usually have your NINO and P60, so they should know how to tax it, but it's better to ask.as for the further withdrawals, yes, these should be taxed at a 20% rate, but if you don't exceed your personal allowance (that's the 1257L code, which is about £12,570), theoretically, you shouldn't pay additional tax. but HMRC might still take the tax upfront, and then you have to claim it back. you can also keep track of your income and report to HMRC to avoid overpaying tax.

[D&C]

those first 25% you withdraw as drawdown are indeed tax-free. but often the pension provider will still take emergency tax because they assume the worst

That is totally untrue.

I have never heard of pension provider who deducted tax from a TFLS.