How is pension drawdown taxed?
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In short: Tax-free cash is 25% of crystallised amounts (within allowances). All other withdrawals are taxed as earned income through PAYE — using personal allowance and basic-rate band first.
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Reviewed by Kaiser Khan
Large single withdrawals can push you into higher-rate tax — spreading withdrawals across tax years saves tax.
State Pension uses part of your personal allowance before drawdown income is taxed.
See pension crystallisation and drawdown income guides.
Primary source: gov.uk/tax-on-your-private-pension/what-you-can-do-with-your-private-pension-pot
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