Have Tax Questions? Ask a Tax Expert for Answers ASAP
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.
Delighted to have been of assistance.
Thank you for your support.