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bigduckontax, Accountant
Category: Tax
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UK Pension draw down. I took my 25% tax free two years ago

Customer Question

UK Pension draw down. I took my 25% tax free two years ago and left the remaining 75% invested. It has now grown to 100% sam as original two years ago. Am i allowed to take another 25% tax free of the sum that has grown nin the last two years.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Assuming that you are over 55 then any moneys you draw down from your pension pot are taxed as follows [source: Gov UK web site]: 'All payments you receive from an annuity or drawdown are taxable as income. You also pay income tax on 75% of the amount of any UFPLS (uncrystallised funds pension lump sum) you receive. The amount of tax you pay will depend on the amount of payments that you receive in the tax year plus any other taxable income you have.' So the lump sum you took two years ago, assuming you were over 55 at the time, is taxable, but only 75% of it and this is at your marginal rate of tax. If you were under 55 then the whole lot is taxable at 55%. You can never liberate all or part of your pension pot tax free, always 25% only is tax free and the 75% balance taxable. I am so sorry to have to rain on your parade.
Customer: replied 2 years ago.
Not quite what I was meaning, my fault. The fund was say 100000 the tax withdrawal tax free was 25000. Leaving 75000. This has grown by 20000 to 95000. Am I able to take 25% of this growth tax free ie. 5000. Thanks.
Expert:  bigduckontax replied 2 years ago.
On your next draw down 25% will indeed be tax free.