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bigduckontax
bigduckontax, Accountant
Category: Tax
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What rate of tax would I pay if I wished to take a further

Resolved Question:

What rate of tax would I pay if I wished to take a further cash drawdown from my pension?
I am 55 years old, earn under £10,000 per annum and pay no tax on my salary.
I have already taken my 25% tax free sum.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Your pension liberation, as you have already extracted your 25% tax free sum, will, if taken after 6 April 2016, be taxed at your marginal rate of tax. With earnings of say 10K, drawdown up to 32K will be taxed at 20% and 40% above that level. I have assumed that your pension pot will not take above 150K and put you into the additional tax bracket at 45%. Furthermore, if the total goes over 100K then you will loose your personal allowance at the rate of a pound for every two quid over; again an unlikely occurrence. Remember the 10K you already earn will be aggregated with your liberation and thus come into the tax computation less your personal allowance of 11K. The 32K is the point when the tax rises from 20% to 40% for any income above that level.

Let me put it another way. Take your 10K income, add the amount of pension pot liberated, take off your personal allowance of 11K, then 32K will be taxed at 20% and 40% over this figure.

I do hope that you have found my reply of assistance.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Great, very comprehensive answer.
Expert:  bigduckontax replied 1 year ago.

Delighted to have been of assistance.

Thank you for your support.