I have a SIPP with Fidelity and my drawdown takes me to the limit of my Personal Allowance, so no tax is payable.

Fidelity recently started paying interest on any cash held and so I have an amount of cash sitting in the SIPP.

This month this interest was taxed and shows on my Pay Advice.

Over the course of the tax year I am not likely to fall into the bracket of having a tax liability on any interest earned either with Fidelity or various savings accounts.

Before I raise queries with Fidelity and (heaven forbid) the HMRC I would like to seek a view from here as to whether I should be paying any tax at all at this interest and am I likely to see it refunded in the wash once the tax year is finalised? Or is there other action I should take?

If it hasn't paid out why would there be tax to pay yet ? If you reinvested dividends there wouldn't be so can't see how interest retained is any different.

Well yes and no. Interest has been added to the cash held in my SIPP. My gross regular withdrawal had the tax on the interest deducted. After further investigation I went onto the HMRC website and my Tax code has been reduced because of the Fidelity interest on cash in my SIPP.

I was holding cash as the 3.6% gross interest seemed a good hedge against some of the recent market turmoil and also means I can choose easily which fund to sell at my time of choosing to hold cash from which the monthly SIPP withdrawal is made.

Regardless, I would have expected that tax in interest would only come into play when the tax year is completed, all interest from all sources is calculated and if anything like last year, I fall within the "no tax due on interest" (or dividends) bracket.