Calculate exactly how much tax you will pay on income drawn from your pension pot. Includes the interaction with other income sources like the State Pension and part-time work.
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When you draw income from your pension pot (after any tax-free lump sum), it is treated as income and taxed at your marginal rate — exactly like a salary. Your personal allowance applies, and the rates are the standard income tax rates.
Your personal allowance of £12,570 applies to all your income combined — pension drawdown, State Pension, part-time earnings and any other income. If your total income is below £12,570 you pay no income tax at all.
The full new State Pension is £11,502 per year (2025/26) — just below the personal allowance of £12,570. This means most people with only State Pension income pay little or no income tax. However, if you add pension drawdown income on top, you may quickly move into the basic rate band.
Be aware that pension providers often apply emergency tax (Month 1 basis) to your first drawdown payment — taxing it as if you will receive that amount every month. This can result in a large initial tax overpayment. You can reclaim this from HMRC using form P55, P53Z or P50Z depending on your circumstances.
Pension drawdown income is not subject to National Insurance. Once you have reached State Pension age you do not pay NI on any income, and pension drawdown is exempt from NI at all ages.