tax deductions on drawdown

hazelh

I am already in drawdown and have taken my tax free lump sum this was quite a few years ago.
I still work.
With the new drawdown rules coming up in April I keep reading that the first 25% of each withdrawal is tax free but surely this is misleading/not true. Good news of course if it is true but I am sure it is no. Can anyone confirm.

stu12345_2

if you take it in small stages non crystalised, then each amount is 25% tax free, the rest falls under ur annual tax allowance eg £10000 basic 20%.
so i believe every amount of ur cash will be taxed if you go above 10000 as u have used the 25% tax free amount already.

hence limit urself to no more than 10000 a year and no tax

but i believe it will automatically be taxed, until u fill in a tax return to show u never made it to 10000 limit. a pain i think. as the tax office dont know what other income u have eg wages taxed at source if ur still working. hence if pension is only source, i think u need tax return form yearly to get tax paid back if u never hit the 10000 limit


if u took it the new way then u could take 12500 a year tax free,as ur 25% tax free will be incorporated into the tax free limit, but the way u have done it, it is only 10000 a year tax fre if thats ur only source of income

so say u need 11000 a year, then the new method is best, but as u have had ur 25% tax free already in the way u have done it, u will pay 20% tax on 1000, eg 1000 above the 10000 limit

dunstonh

With the new drawdown rules coming up in April I keep reading that the first 25% of each withdrawal is tax free

Only if you choose that option. That option has technically existed for a decade. However, it wasnt a mainstream option. It was called phased drawdown.

Good news of course if it is true but I am sure it is no.

doesnt apply to you as you havent used phased drawdown.

atush

What you can do to save tax, is wait to draw your pension funds until you are no longer working, or draw some now up to GAD rate each year and put the same amt into a new DC pension.

As you are working and have income and this isn't a LS it would not fall foul of recycling rules.

kidmugsy

hazelh wrote: »

I am already in drawdown and have taken my tax free lump sum.

No: if you've already taken your 25% tax-free lump sum, that's that. No more tax-free. Unless, that is, you've made new contributions into the pension.

hazelh

That is what I thought but I can only dream.
It was just that the statement - " 25% of each withdrawal will be tax free". Checking there had been no general generous other change that had taken place. LOL