Understanding how your pension benefits will be taxed is an important part of developing your retirement income plan. Read on to find out how this may affect you and how much it could be.


Do I pay tax on my pension income?

Tax on income you receive from a pension is calculated in the same way as earnings from employment. There is an annual personal allowance, which means that you can have an annual pension income of up to £12,570 (2024/25 tax year) that is not taxed. Income above this is subject to tax at rates of 20%, 40% or 45% depending on your overall total income. Learn more about income tax rates.


How are pensions taxed?

You pay tax if your total annual income adds up to more than your personal allowance of £12,570 (2024/25 tax year). Find out about your personal allowance and income tax rates.

Your total income could include:

  • The state pension you get (either the basic state pension or the new state pension)
  • Additional state pension
  • A private pension (workplace or personal)
  • Earnings from employment or self-employment
  • Any taxable state benefits you get
  • Any other income including that received from investments, property or savings.

Depending on the level of your total income, including any taxable lump sum you take from a pension, you may have to pay income tax at a higher rate on the income you receive. You may also owe extra tax, or be due a refund of tax, at the end of the tax year.


How much tax do I pay on my pension income?

Pensioners do not receive a higher personal allowance for their income than other age groups. The amount you can receive tax-free before you start paying income tax on your pension, also known as a tax free personal allowance, is £12,570 for 2024/25. You will pay basic rate tax (20%) on your total income between £12,570 and £50,270. This means you can earn up to £50,270 before you start paying higher rate tax.

If you are married or in a registered civil partnership and you and/ or your spouse or civil partner were born before 6 April 1935, you can also claim a married couple’s allowance (MCA).

If you have any further questions around how tax could affect your retirement, you can find additional support on the Money Helper site.

Next steps

Our pension income calculator provides a helpful estimate of your potential retirement income.

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Need help?

Making well-informed decisions about how to finance your retirement is important so it’s worth making use of the guidance and advice services available.


Retirement guidance

Pension Wise from MoneyHelper

The government’s free and impartial service, offering guidance to make money and pension choices clearer.

To find out more or book an appointment online click below or call.

0800 138 3944
8am to 6.30pm, Monday to Friday.
Calls may be recorded and monitored.

Speak to us

Our colleagues in Cardiff are always happy to answer your questions or help you apply for a quote.

0800 048 2446

Monday to Friday
9am to 5pm
We may record and monitor calls.

Retirement advice

Retirement Advice Service from Legal & General

Our advisers are experts in retirement regulated by the Financial Conduct Authority, so you can trust them to provide impartial advice and a personal recommendation that’s right for you.

0808 304 9155

Our team is available between 9.00am and 5.00pm, Monday to Friday. Calls may be monitored and recorded.