Maximum tax free withdrawal

ader42

You should factor in your other income sources too, such as the state pension as has been mentioned.

For example if you will not be getting a state pension for 12 years then you may decide to try for the £100k to bridge that gap as best as possible (you’d get 8.3 years of £12k with no growth or loss factored in).

If your state pension age is sooner then you may prefer to take the 25% tax free lump sum and then £12k per year thereby taking it all out tax free in 6.25 years.

Or you may decide you just want £12k taxable (at zero %) per year until you’ve used the 75% taxable; the remaining 25% being tax free still sitting there in your pot for you to take out to top up your state pension at a later date if required. 

Or some other option between that suits. i.e you could take £16k with 25% of that as tax free cash and then make additional tax free cash withdrawals as and when you feel like it out of the maximum 25% (assuming your pension provider is truly flexible). 

If taking £12k taxable per year, I suggest taking £1k per month rather than as large lumps so HMRC do not take any tax, meaning you don’t have to claim it back. Well make the very first payment £1k anyhow so you get the correct tax-code.

So back to your original question, the maximum in year one is 25% tax free cash plus £12570; just as MTB1986 said. 

Scot_39

Lone_Tiger_Rider64 said:

Hi all. New to the board as a poster and I'd like to ask what may seem a simple question but the answer may determine my future plans!

If for sake of argument I have a DC 'pot' with lets say £100k in what would be the most I can withdraw in one year to pay no tax? I'm UK based, 60 years old and let's assume no other income. Would I be right in thinking the amount would be roughly £16000, ie - £4000 would be my pensions 25% tax free allowance and £12000 keeps me within my personal tax allowance?

Yes - by not crystalizing the whole fund - so UFPLS / lump sum withdrawals - 25% tax free - you could take £16760.

But until the tax man gets his act together on issuing non emergency tax codes - target summer 25 - reality ? - you might want to take that in at least 2 chunks after HMRC issues the right tax code

That might at a push last with some small inflation indexing - until you get the full state pension (currently 67 for a 60 yr old male) - assuming your looking at a "gap" type arrangement.

If you need more right now - but could live with less later - flexi drawdown - you could take - 25% of the total tax free now - £25k as the tax free lump sum and the £12570 taxable from the remaining £75k - so £37570.  Or leave the £75k sitting invested for longer.

Just be careful how the tax man treats pensions - one off taxable lump sums even after they fix the issue they have promised to for multiple withdrawls - with finally abandoning month 1 tax codes for those taking taxable starting mid year - will still be problematic.