Answers · UK 2025/26

How is a £600,000 pension pot taxed if I take income drawdown?

From a £600,000 pension pot, you can normally take £150,000 (25%) as a tax-free lump sum, leaving £450,000 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 £600,000 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 -- £150,000 -- leaving £450,000 in the taxable portion. Every withdrawal from that £450,000 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 means retirement income from drawdown alone could realistically sit at or above the higher-rate threshold for a meaningful number of years unless withdrawals are spread very deliberately over twenty-five years or more, using the Personal Allowance and basic-rate band each year alongside the State Pension. Withdrawing more heavily in earlier retirement years, or combining drawdown with other income such as continued part-time work, risks pushing combined income above £100,000 and tapering the Personal Allowance, or above £125,140 into the 45% additional rate. Pension providers usually apply an emergency tax code to the first withdrawal in a tax year, correctable through HMRC or automatic year-end reconciliation. Financial advice is strongly recommended for drawdown planning at this scale.