Answers · UK 2025/26

How is a £300,000 pension pot taxed if I take income drawdown?

From a £300,000 pension pot, you can normally take £75,000 (25%) as a tax-free lump sum, leaving £225,000 to draw down as taxable income. Withdrawals from the taxable portion are added to your other income for the tax year and taxed at your marginal rate.

Last updated: 10 July 2026Last reviewed: 10 July 2026How we verify

Full answer

A £300,000 defined contribution pension pot accessed through flexi-access drawdown from normal minimum pension age (currently 55, rising to 57 from April 2028) allows a Pension Commencement Lump Sum of up to 25% tax-free -- £75,000 -- leaving £225,000 in the taxable portion. Every withdrawal from that £225,000 is added to any other income you have in the tax year it is taken and taxed at your marginal Income Tax rate. A pot of this size gives real scope for tax planning: spreading withdrawals over twenty years or more, in amounts that fit within the Personal Allowance and basic-rate band alongside the State Pension, can keep much of the £225,000 taxed at 0% to 20%, while drawing large sums quickly would push significant amounts into the 40% higher-rate band and, if combined with other income, could trigger the £100,000 Personal Allowance taper in the years those withdrawals are taken. Pension providers usually apply an emergency tax code to the first withdrawal in a tax year, correctable by contacting HMRC or through automatic year-end reconciliation. Accessing the taxable portion beyond the lump sum also triggers the £10,000 Money Purchase Annual Allowance if you plan to keep contributing to a pension while working, which matters for anyone considering phased retirement.