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Tax on SIPP withdrawal

Practical Issues
EssDeeAitch
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Tax on SIPP withdrawal

#222529

Postby EssDeeAitch » May 17th, 2019, 6:00 pm

Can anyone help with this question? If a SIPP grows post the 25% tax free draw-down, is a further drawdown allowed on that growth?

For purposes of illustration

SIPP value on retirement £100,000
25% tax free withdrawal £25,000
Balance £75,000

SIPP left untouched for x years and grows to £100,000 (so growth of £25,000)

My question is this. Is a further draw-down allowable and if so, would this be 25% of the £25,000 growth?

Chrysalis
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Re: Tax on SIPP withdrawal

#222534

Postby Chrysalis » May 17th, 2019, 6:11 pm

No, once you have crystallised the whole pot and taken 25% tax free, any further withdrawals from are taxable income (this arrangement is called flexi-access drawdown, you drawdown flexibly from the fund, but its all taxable beyond the first 25%)
If you use UFPLS to withdraw lump sums, then only 25% of each withdrawal is tax free. However if your SIPP grows then you may end up with more tax free cash than using the first option.

EssDeeAitch
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Re: Tax on SIPP withdrawal

#222535

Postby EssDeeAitch » May 17th, 2019, 6:13 pm

Jabd2001 wrote:No, once you have crystallised the whole pot and taken 25% tax free, any further withdrawals from are taxable income (this arrangement is called flexi-access drawdown, you drawdown flexibly from the fund, but its all taxable beyond the first 25%)
If you use UFPLS to withdraw lump sums, then only 25% of each withdrawal is tax free. However if your SIPP grows then you may end up with more tax free cash than using the first option.


Many thanks, that clears that up for me.

gadgetmind
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Re: Tax on SIPP withdrawal

#231571

Postby gadgetmind » June 23rd, 2019, 5:10 pm

The above answers are correct, but you can of course still continue to contribute to your SIPP and if your income won't exceed your personal allowance doing this will get you an extra £720 pa from the tax man.

Still in £240 pcm, HMRC gross this up to £300, you therefore get £60x12=£720pa, and you can take our 25% tax free and the rest subject to tax. It's marginal if you pay 20% tax but an excellent source of extra money otherwise.


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