How can I avoid paying 'emergency tax' to HMRC on a pension withdrawal? Steve Webb replies
I have a drawdown pension worth £84,000.
I will be 74 in December 2023, and my spouse is 72.
My total income arising from an occupational pension in payment and state pension is around £30,000 per annum.
So in addition to taking 25 per cent tax-free cash I intend to take an additional lump sum this tax year from the drawdown pension so that I only pay 20 per cent tax up to my annual allowance limit of £50,270.
In other words, this would be an additional £20,000 at 20 per cent tax.
However, my pension firm advises me that they will apply an emergency tax code on this £20,000 and then I need to reclaim overpaid tax from HMRC.
My question is could I request HMRC to advise me/my pension firm prior to taking the £20,000 that only 20 per cent tax should be applied, saving me further effort to communicate with HMRC to refund me overpaid tax for this tax year?
Is there any standard template I can use to contact HMRC about my intentions as above?