Tax on a £75,000 pension withdrawal — into higher rate territory.
How much tax will you pay on a £75,000 pension withdrawal? See the split across basic and higher rate bands and plan your withdrawal strategy.
A £75,000 pension withdrawal will almost certainly push you into the 40% higher rate tax band. With UFPLS treatment, £18,750 is tax-free and £56,250 is taxable. Combined with state pension income, you are looking at total taxable income around £68,000 — roughly £18,000 above the higher rate threshold. That means about £18,000 is taxed at 40% instead of 20%, costing you an extra £3,600 compared to keeping everything in the basic rate band. The total tax bill on the withdrawal alone could be around £10,000-£12,000 depending on your other income. This is a withdrawal size where phasing really matters. Taking £37,500 this tax year and £37,500 next tax year could save you the entire higher rate surcharge. If you need the money in one go, at least plan the timing around the tax year boundary in April.