Can I take up to 25% of my pension pot without having to pay any tax?
20 November 2023
Question by Robin
I have a work place pension that pays me enough to live off for the time being. I also have an old personal pension plan that is worth about £25K which I have not touched for several years. Am I right in thinking that I can take up to 25%, i.e. £6,250, of this small pension pot without having to pay any tax? I am a basic rate tax payer and the extra £6,250 wouldn't take me into the higher income tax bracket. I'm looking spending some money on tidying up my house.
Answered by Tracey Che
If you have never taken any money out of the pension worth c£25k (i.e. it is uncrystallised), and assuming you have not taken the full tax-free cash allowance across all of your pensions, then you are correct in thinking that you will be able to access 25% of this pot as a tax-free lump sum.
This is different to taking pension income, which is taxable and can take you to higher rate income tax.
Hope this helps.