To make your income drawdown tax-efficient, consider the following:
- Personal allowance: Withdraw amounts that keep you within your annual personal allowance to minimise tax.
- Tax-free lump sum: Take advantage of the 25% tax-free lump sum available from your pension pot. This doesn’t need to be fully withdrawn on day one. If you have no capital requirements you could draw this periodically or as a tax free monthly income.
- Tax brackets: Plan withdrawals to avoid moving into a higher tax bracket.
- Professional advice: Consult with a financial adviser to develop a tax-efficient withdrawal strategy tailored to your circumstances.