SIPP Withdrawals - Tax, HMRC, 25% PCLS, Drawdown & Timelines

A SIPP is a tax-free wrapper that allows you to consolidate all of your UK pensions in one place. SIPPs give investors more flexibility and control than a traditional UK company pension. However, there is still a lot of misinformation floating around about the SIPP, particularly about withdrawal, the timeline, the benefit of the 25% lump sum, and the relationship with HMRC. Furthermore, there is still some ambiguity about the distinction between a SIPP and a savings account.

The very first thing to understand is that your SIPP is not the same as a savings account. You can withdraw from your SIPP once you reach the age of 55. On the other hand, if you have a savings account, you can easily access it with your finger tips, and dang! Your money is at your disposal.

Savings accounts are taxed at the marginal rate; however, SIPPs allow you to withdraw 25% of your SIPP fund tax-free. You could do this as an upfront, tax-free lump sum. Alternatively, you could have the first 25% of each drawdown payment be tax-free. In either case, you will be taxed on 75% of your fund when you withdraw it.

Savings accounts do not require you to legally go through HMRC to withdraw your money; however, SIPP withdrawals must legally go through HMRC. It means that if you withdraw funds from your SIPP, the provider will notify HMRC automatically.

In this video, we're going to discuss what's required to withdraw money from a SIPP.

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Video Timestamp:
00:00 – Intro
00:28 – SIPP is Not The Same As A Savings Account
00:53 – Any SIPP Withdrawal Have To Legally Go Via HMRC
01:17 – NT Tax Code
02:57 – SIPP Drawdown Timeline
03:30 – Taxation of SIPP
04:57 - Always Withdraw Your SIPP in GBP
05:34 - The Timeline of SIPP’s Withdrawal
06:26 – Outro

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References and Helpful Links:

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Key Points In This Video:
✅ SIPP Withdrawal
✅ NT Tax Code
✅ The Timeline of SIPP’s Withdrawal
✅ Taxation of SIPP

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[CuriouslyInquisitive]

Well explained, the emergency tax code could get many off guard although it is possible to get a refund.

[dominic]

If I had the max tax free cash of c£268k. Could I take £26800 tax free per annum and £12570pa from drawdown to give me an income of c£39k pa without paying any tax for approx 10 years? Many thanks.

[nhuk]

Great video but I'm unclear on one point. I wish to draw down from my SIPP and then immediately put the funds into my existing ISA. Today is 20th January 2023 and I believe there might be two to three PAYE periods before the end of the tax year.


I wish to avoid paying any upfront tax. I have a balance of £4181.60 within my 2022-23 personal allowance that I wish to draw down from my SIPP. How should I do this drawdown in the remaining 2022-23 tax year with my tax code stated as "1257L X replaces 1257L"?

[Bracebarian]

Thanks, Interesting video. Assuming its impossible to avoid the emergency tax code on the 1st SIPP payment, is it worth just taking a small amount for the 1st month ? If the objective is to draw up to the tax free allowance in year 1, would you need to divide £12570 into 12 withdrawals. What do you have to do to get onto a standard tax code.

[rogerelia]

Hi, ,
Great content and learning a lot from your channel. I do have a question. Is it compulsory for my country of residence to have a double taxation treaty in order to draw funds gross from an isipp?

Thanks.

[stevethom]

How do i remove part of my private pension to allow me to clear debt? I ak aware of the tax implications bein under 55.

[worma]

Hi James.
Good presentation.
I live in Australia but have remaining pensions in the UK as does my wife.
We do not plan on returning to the UK.
I have been told the the most cost effective way of moving UK pension funds over to AU is to transfer our pensions in to a SIPP and then transfer that SIPP in to an AU QROPS fund.
Would you agree with this?

Great content, thanks for all the info.
Do our country of residence respect the 25% PCLS though? I mean, the UK won't tax it, and will only tax the remaining 75% unless you ask for the NT tax code. But what happens when the money gets to your country of residence? In my case that'd be Spain, with a tax treaty. They'd def want to tax the 75%, and that's ok, but what about that PCLS?

And related to that, will an iSIPP allow to spread the PCLS in all the monthly payments just like you can in the UK? Or when moving abroad we lose that option and a lump sum is the only way to benefit?

Many thanks!

[UchihaMangekyou]

Interesting stuff! I have around £3200 in a SIPP from a previous job where I was a Director. Left this position in Jan and have not worked since. Would it be possible to receive the full amount without being taxed in this instance? Could really do with the cash 😅

[myafrosheen]

So what happens if someone had investment trusts which paid a dividend? If the person for example chose not to sell their income funds but wanted to draw down the dividends I'm assuming that the income would be withdrawn to their bank account tax-free

[MultiWordsofwisdom]

HI James
I have a SIPP valued at around 56, 000. I, m looking to withdraw 25% tax free before the end of March 24.
Am I correct in believing I have this right?