How are pension withdrawals taxed under flexi-access drawdown?
Answered 17 March 2026
Here is a comprehensive answer on how pension withdrawals are taxed under flexi-access drawdown:
What the law says
Charge to income tax Flexi-access drawdown pension (including income withdrawal and short-term annuities) constitutes a "pension under a registered pension scheme" and is therefore charged to income tax as pension income under s.579A ITEPA 2003. The taxable amount is the full amount of the pension that accrues in the tax year, irrespective of when it is actually paid (s.579B ITEPA 2003). The person liable for the tax is the person receiving or entitled to the pension (s.579C ITEPA 2003).
Exemption for certain beneficiaries Section 579A does not apply to dependants', nominees', or successors' income withdrawal where it is paid in respect of a deceased member who had not reached age 75 at the date of death, and is paid from the relevant flexi-access drawdown fund under a money purchase arrangement.
Temporary non-residents Where a member is temporarily non-resident, relevant withdrawals from a flexi-access drawdown fund (including income withdrawals and short-term annuities) may be brought back into charge on return to the UK if the total exceeds £100,000 (s.579CA ITEPA 2003).
HMRC guidance / practice
Marginal rate taxation via PAYE HMRC confirms that flexi-access drawdown pension is chargeable to income tax as pension income. The member is liable at their marginal rate on whatever income they take from their flexi-access drawdown fund during the tax year. The scheme administrator is required to deduct income tax under the PAYE regulations.
No minimum or maximum withdrawal There is no minimum or maximum amount that a member must or can take in any tax year. The member can choose to take nothing, a regular series of payments, an irregular stream, or their entire fund as a single payment.
Practical examples from HMRC:
- If a member takes £10,000 as income withdrawal from their flexi-access drawdown fund, that £10,000 is taxable as pension income at the member's marginal rate.
- If a member's total taxable income (salary + drawdown) exceeds the higher rate threshold, they will be liable to income tax at the higher rate on the excess.
Money Purchase Annual Allowance (MPAA) Taking income from a flexi-access drawdown fund triggers the money purchase annual allowance rules, which reduce the amount of tax-relieved pension contributions that can be made to money purchase arrangements going forward. Members using flexi-access drawdown may therefore be subject to the lower money purchase annual allowance if they wish to continue making contributions.
Summary
| Feature | Treatment |
|---|---|
| Tax charge | Income tax under s.579A ITEPA 2003 |
| Rate | Member's marginal rate |
| Collection | PAYE by scheme administrator |
| Taxable amount | Full amount accruing in the tax year |
| Withdrawal flexibility | No minimum or maximum |
| MPAA trigger | Yes – on first income withdrawal |
Citation sources
Tom, aged 58, has pension savings in his money purchase scheme of £120,000. He has no other pension savings but is still employed and receives an income of £27,000 a year. In December 2015, he decides that he wants to put the funds into a flexi-access drawdown fund. He can have £30,000 paid to him as a tax-free lump sum. The remaining £90,000 is designated as available for the payment of drawdown pension. In tax year 2015-16, Tom takes £5,000 from his flexi-access drawdown fund. His total taxabl
Contributions can be paid into the scheme providing the drawdown pension, or into another pension scheme. However, members will need to consider the tax consequences if they wish to continue making contributions or accrue benefits. Members using flexi-access drawdown may be subject to the lower money purchase annual allowance (see PTM056510). Top of page
Part 9 Pension income Chapter 5A PENSIONS UNDER REGISTERED PENSION SCHEMES Temporary non-residents 579CA 1 This section applies if a person is temporarily non-resident. 2 Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 579B as if they accrued in the period of return , but only if the total amount of— a the relevant withdrawals within subsection (3), and b the relevant withdrawals (as defined by section 576A(4)) within section 576A(3) for the same temp
Dinta has £40,000 in a money purchase arrangement which she wants to take benefits from through drawdown. She hasn’t previously designated any funds to a drawdown pension fund and has no other pension savings. Dinta therefore designates £30,000 to a flexi-access drawdown fund. At the same time, she receives from her money purchase arrangement a tax-free lump sum of £10,000 (one third of the value of the funds she put into drawdown). Dinta does not have to take any income from her flexi-access dr
Paragraph 8A schedule 28 Finance Act 2004 Drawdown pension will be flexi-access drawdown if: the member first designated funds under the arrangement to provide drawdown pension on or after 6 April 2015 – see PTM062730 for more detail on 5 April 2015 the member could receive drawdown pension under the arrangement payable as flexible drawdown - see PTM062740 for more information on 5 April 2015 the member was in capped drawdown and later converted to flexi-access drawdown. PTM062750 provides guida
Section 165(2) Finance Act 2004 Section 579A Income Tax (Earnings and Pensions) Act 2003 Flexi-access drawdown pension (which includes income withdrawal and short-term annuities) is a form of pension for tax purposes and so is chargeable to income tax as pension income. The member receiving flexi-access drawdown pension is liable for income tax at their marginal rate in a tax year on whatever income they take from their flexi-access drawdown fund during that year. The scheme administrator is re