25% of your pension savings is tax-free. However, the other 75% is subject to income tax. The amount of tax your pay is calculated off of your total income each year.
The tax-free amount doesn’t account for your Personal allowance. Therefore, the tax free about is on top of your Personal Allowance
If you take your tax-free amount out of your pension savings, you cannot leave the remaining 25% untouched. Your must either:
· Buy a guaranteed incomes
· Get an adjustable income
· Take the whole savings
If you continue to work while claiming pension your employed will take any tax you owe off of your earnings and state pension (PAYE).
If your income totals £100,000 or more for the tax year or if you’re self employed you will have to fill in a Self-Assessment tax return.