How Much Can I Withdraw From Personal Pensions And Stay Within Basic Rate Tax Limit?

amse

Can you pension and tax experts please advise me regarding how much I can withdraw from my personal pensions and stay within the basic rate tax limit?

My income from my state and company pensions plus untaxed savings interest is about £36,500.

I have separate personal pensions that I am not taking regular income from, a personal pension plan that I have not touched, and a SIPP which I have made occasional withdrawals from.

As the personal allowance is £12,500 and basic rate tax applies between £12,501 and £50,000, is it the obvious calculation that I can withdraw up to £50,000 - £36,500 = £13,500 taxable = £18,000 gross from my personal pensions without incurring higher rate tax?

I am considering withdrawing a smaller amount, say £12,000, which is £9,000 taxable pension, so the total taxable income would be £45,500, well below the £50,000 limit for basic rate tax.

If I did this type of pension lump sum withdrawal, on a one off or possible recurring annual basis, would there be any implications, such as any impact on my tax status or tax in future years?

Thank you for reading and your guidance, folks.

El_Torro

Your calculations look pretty much correct, assuming you don't live in Scotland.

I don't see an issue with you removing £12k from your pension every year. As long as you pay the right tax at the right time. Of course depending on how large your pension pot is you might run out of money

garmeg

amse said:

Can you pension and tax experts please advise me regarding how much I can withdraw from my personal pensions and stay within the basic rate tax limit?

My income from my state and company pensions plus untaxed savings interest is about £36,500.

I have separate personal pensions that I am not taking regular income from, a personal pension plan that I have not touched, and a SIPP which I have made occasional withdrawals from.

As the personal allowance is £12,500 and basic rate tax applies between £12,501 and £50,000, is it the obvious calculation that I can withdraw up to £50,000 - £36,500 = £13,500 taxable = £18,000 gross from my personal pensions without incurring higher rate tax?

I am considering withdrawing a smaller amount, say £12,000, which is £9,000 taxable pension, so the total taxable income would be £45,500, well below the £50,000 limit for basic rate tax.

If I did this type of pension lump sum withdrawal, on a one off or possible recurring annual basis, would there be any implications, such as any impact on my tax status or tax in future years?

Thank you for reading and your guidance, folks.

You can take out £13,500 out of crystallised funds before exceeding basic rate tax. Crystallised funds have already paid out the tax free cash.

You can take out £13,500 x 4/3 = £18,000 out of uncrystallised funds (tax free cash of £4,500 plus £13,500 taxable).

Adjust figures if in Scotland. Also careful with savings interest which is still classed as taxable income even though the first £1,000 (£500 for a higher rate taxpayer) is taxed at 0%.

squirrelpie

amse said:

If I did this type of pension lump sum withdrawal, on a one off or possible recurring annual basis, would there be any implications

It sounds like you have already made withdrawals from this pension. Did they include a tax deduction, in which case the pension provider now has a tax code for you that they can use? If they don't have a tax code, you will be charged emergency tax and have to reclaim it, or wait for it to be repaid next year.