Darka wrote:Seeing the recent dividend drawdown question from Gilgongo made me want to ask a question that's been on my mind as I consider what to do when I can access my SIPP in September 2024.
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For instance, my SIPP's income will be above the personal allowance, I could reduce this by taking the 25% and reinvesting in ISA's but even after taking the 25% the income will be above the personal allowance, or I could take higher UFPLS payments and only a small upfront 25% for a new kitchen.
Going forwards, I could then reduce my drawdown to stick to the personal allowance, thus avoiding tax but I can't see the point as that money would be stuck in the SIPP instead of being available to spend/invest in ISA's as I choose.
So, is there any advantage that I am missing of deliberately avoiding tax or is maximising income (and paying some tax) more important (as I believe)?
Wow, this thread has drifted - and I thought Gengulphus wrote sime complicated stuff but I'm not at all sure what 1nvest was getting at
The things that are missing from Darka's post are...
1) you're retired, you pay no tax, so how are you living at the moment?
2) Can you carry on living like that, in which case why change things?
3) Do you have significant unsheltered assets?
4) What level of income do you want - do you need to draw from SIPPs or ISAs?
5) Do you have any inheritance plans (yeah, I know, early days you hope, but...).
kempiejon wrote:I'd work out how much I wanted as an income then work out a tax efficient way of extracting it. Deliberately curtailing income and the experiences and things that could come with that money to avoid paying tax on it seems a hair shirt.
This! - don't let the tax tail wag the dog, generate what you need to live on in the most tax efficient manner. Just because you CAN access your SIPP, doesn't mean you need to.
Generally, the simple rule is to use up unsheltered assets first, selling to use CGT and using personal allowances on dividends, and moving to ISA/SIPP as appropriate (you can still add £2880 to your SIPP anyway).
BUT, if you have a spouse you might want to maximise your ISA holding so they can inherit, or you might wish to maximise your SIPP for the IHT rules if you have children, especially until you hit 75 (although personally I can see this changing in the next few years).
Without this info it is impossible to make good suggestions, as what works for me will probably not work for you.
Paul