State pensioners planning to start withdrawing their pensions are being advised to take a small initial withdrawal of around £100. This approach helps avoid being taxed at a higher emergency rate on their first pension income, according to personal finance specialists.
When beginning pension drawdown, HMRC sometimes applies an emergency tax code, which can result in substantial tax deductions on the initial withdrawal. Since HMRC’s systems do not yet automatically prevent this, pensioners often face overpaid tax which must later be reclaimed, causing delays and frustration.
Taking a modest first withdrawal — such as £100 — ensures that only a small amount is taxed at the emergency rate, allowing subsequent larger withdrawals to be taxed correctly. Experts recommend pensioners follow this method to minimize unnecessary tax liability.
If you do find yourself subject to emergency tax, contact HMRC promptly to claim a refund. Proper planning when accessing your pension is vital to make informed decisions, maintain your standard of living, and avoid financial setbacks.
By adopting this simple but effective tip, pensioners can reduce stress and make their retirement income go further.