Income Drawdown Tax Changes
Change to the tax treatment of non-monthly payments.
From 6 April 2017 HMRC are making changes to how pension providers administer PAYE on SIPP Income Drawdown payments.
This will only apply where flexibly accessed drawdown payments are made at either quarterly, half yearly, yearly and termly frequencies. This change follows clarification from HMRC in a recent Pension Newsletter provided to pension scheme administrators on how they expect PAYE to operate going forward. This may increase the initial tax deducted at source from income payment, however, it will not increase your overall tax liability.
Although you may see an increase compared to previous years, there should be no action required as the PAYE system is designed to collect the correct amount of tax over the course of a tax year. However you may wish to consider the following:
Changing the frequency of the income – by spreading payments to monthly over the course of the tax year, depending on the HMRC tax code, you can spread the income and potentially result in a better use of the personal allowances and tax bands.
Reclaim tax via HMRC – if you have suffered a large additional tax charge that you do not believe is due, you can claim a tax refund during the tax year by completing either form P50Z, P53Z or P55. The forms can be found at:
If you wish to discuss any of the above in more detail or if you would like to review your current situation then please do not hesitate to get in touch and arrange a free consultation.
Source: Standard Life