Answers · UK 2025/26

How is a £75,000 pension pot taxed if I take income drawdown?

From a £75,000 pension pot, you can normally take £18,750 (25%) as a tax-free lump sum, leaving £56,250 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 £75,000 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 -- £18,750 -- leaving £56,250 in the taxable portion. Every withdrawal from that £56,250 is added to any other income you have in the tax year it is taken and taxed at your marginal Income Tax rate. With no other income, withdrawing up to £12,570 a year uses the full Personal Allowance tax-free, meaning the £56,250 taxable balance could be drawn over roughly four and a half years without any Income Tax if spread carefully, though most retirees combine drawdown with the State Pension and other income sources, which reduces the tax-free headroom available each year. Taking large lump sums from the taxable portion in a single tax year risks pushing income into the 40% higher-rate band unnecessarily. Note that taking any taxable income (not just the tax-free lump sum) from a defined contribution pot through flexi-access drawdown triggers the Money Purchase Annual Allowance, cutting your annual pension contribution allowance to £10,000 if you are still working and paying into a pension.