Answers · UK 2025/26
Do I pay tax on my pension in the UK?
Yes — most pension income is taxable as earnings for 2026/27, but you still get the £12,570 Personal Allowance tax-free. Up to 25% of a private pension pot can usually be taken as a tax-free lump sum, and pensioners pay no National Insurance.
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Pension income is generally taxable for 2026/27, but it benefits from the £12,570 Personal Allowance like any other income, and pensioners do not pay National Insurance. The State Pension (£241.30 a week, about £12,548 a year for the full new State Pension) is taxable but paid without tax deducted, so if you have other income it can push you over the allowance. Private and workplace pension income is taxed via PAYE at 20%, 40% or 45% depending on your total income. Crucially, you can usually take up to 25% of a defined contribution pot as a tax-free lump sum (the Pension Commencement Lump Sum), capped at £268,275. Worked example: a retiree with the full State Pension (£12,548) plus a £6,000 workplace pension has total income of £18,548; after the £12,570 allowance, £5,978 is taxed at 20% = £1,196. In Scotland the rates above the allowance differ (starter 19% etc.), so the tax may vary slightly. Drawing too much in one year can needlessly trigger 40% tax, so phased withdrawals are often smarter. Use the Pension and Take-Home Pay calculators to estimate the tax on your retirement income.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.