Pension Drawdown Tax Calculator
Frequently Asked Questions
How is pension drawdown income taxed in the UK?
Pension drawdown income is taxed as earned income using the standard income tax bands. For 2024/25 the personal allowance is £12,570, the basic rate is 20% on income up to £50,270, the higher rate is 40% up to £125,140, and the additional rate is 45% above that. State pension and any other income count towards the same annual total.
What is the difference between UFPLS and PCLS drawdown?
Under UFPLS (Uncrystallised Fund Pension Lump Sum) each withdrawal is 25% tax-free and 75% taxable. Under PCLS (Pension Commencement Lump Sum) you take up to 25% of the pot as a one-off tax-free lump sum first, then all subsequent drawdown income is fully taxable. PCLS is usually better if you want a large tax-free cash amount upfront.
Is there National Insurance to pay on pension drawdown?
No. Pension drawdown income is not subject to National Insurance contributions, unlike employment income. This applies to both the PCLS route and UFPLS withdrawals, regardless of your age.
What is the tax-free cash limit on a pension?
Since April 2024 (after the abolition of the Lifetime Allowance) the maximum tax-free cash is capped by the Lump Sum Allowance of £268,275. Previously it was 25% of the LTA (£268,275 = 25% × £1,073,100). If you hold LTA protection your limit may be higher.
Does drawdown income affect my personal allowance?
Yes. Large drawdown withdrawals can push your total income above £100,000, which causes the personal allowance to be gradually withdrawn at £1 for every £2 of income above £100,000. The allowance reaches zero at £125,140, creating an effective 60% marginal tax rate in that band.