If I go into drawdown and take 25% tax free can I still take £12,570 annual income from my DC pension without incurring income tax?

20 September 2021

Question by Ian

If I go into drawdown and take 25% tax free can I still take £12,570 annual income from my DC pension without incurring income tax?


Answered by

Hi Ian

As long as you don't have any other taxable income, then yes. If you don't need the 25% as a lump sum then you could take it on a monthly basis by cashing in £16,760 pa, of which 25% is tax free and the other 75% is taxable but covered by your personal allowance. This saves your tax free cash sitting in your bank account doing nothing if you don't have any capital expenditure, and is also great if you have an Inheritance Tax Liability as pensions aren't subject to IHT.

Regards
Rachel