Flexi-Access Drawdown Tax Question

_pete_

I understand that instead of taking 25% of my pension as a lump sum, I could opt for a flexible drawdown arrangement whereby I take payments from my pension at regular intervals.

My understanding is that 75% of each payment would be taxable.

My question is: if I take an annual payment of £16k, how much (if any) of that payment would be taxable if that is my only source of income - bearing in mind that the first £11k counts as my personal allowance.

Thanks

zagfles

_pete_ wrote: »

I understand that instead of taking 25% of my pension as a lump sum, I could opt for a flexible drawdown arrangement whereby I take payments from my pension at regular intervals.

Known as UFPLS (there's also phased drawdown which can achieve similar).

My understanding is that 75% of each payment would be taxable.

My question is: if I take an annual payment of £16k, how much (if any) of that payment would be taxable if that is my only source of income - bearing in mind that the first £11k counts as my personal allowance.

Thanks

You'd only pay tax on £500.

£12k would be "taxable", but don't confuse "taxable" with "taxed". If you have a taxable income of £12k, then £11,500 would fall within your personal allowance so you'd only pay tax on £500, so £100 in tax.

The other £4000 wouldn't be taxable, so it doesn't use up your personal allowance.

_pete_

Thank you, that's very helpful.

Dazed_and_confused

My question is: if I take an annual payment of £16k, how much (if any) of that payment would be taxable if that is my only source of income - bearing in mind that the first £11k counts as my personal allowance

The £500 is correct on the assumption that this is your only source of income for the entire tax year.

Based on Conservative election manifesto there is a good chance the Personal Allowance will be increased (for the 2018:19 tax year) in the forthcoming budget so it may be possible to withdraw £16,000, £12000 being taxable income and pay no tax from 06 April 2018. Again this is dependent not only on the budget but also assumes you have absolutely no other taxable income in the (tax) year.

If you are married and have applied for Marriage Allowance you will have more tax to pay as your Personal Allowance will be that bit less.

Alexland

...such as state pension.