Tax on a £100,000 pension withdrawal — personal allowance at risk.
How much tax will you pay on a £100,000 pension withdrawal? Learn about the 60% effective tax trap and strategies to reduce your bill.
A £100,000 pension withdrawal triggers one of the most punitive traps in the UK tax system: the personal allowance taper. Once your adjusted net income exceeds £100,000, you lose £1 of personal allowance for every £2 of additional income. This creates an effective marginal tax rate of 60% on income between £100,000 and £125,140. With UFPLS treatment, £25,000 is tax-free but the £75,000 taxable portion, combined with state pension, pushes total income to roughly £87,000. If you have any other income, you could easily breach £100,000. The tax bill on a £100,000 withdrawal can reach £20,000 or more. Splitting across two or three tax years can save £5,000-£10,000 in tax. If you must take the full amount, consider whether salary sacrifice, pension contributions, or charitable donations can bring adjusted net income below £100,000.