Your guide to tax

Paying tax on your pension

When you take money from your pension savings, either as one or more lump sums or as regular income, you’ll usually have to pay tax.

Whatever you take out will be added to any other income you have in the same tax year, including state pension, benefits and salary payments. This may mean you pay a higher rate of tax. The tax year runs from 6 April one year to 5 April the next

In some cases money you receive from your pension will be made after tax has been taken off by your provider, in others you’ll be responsible for telling HM Revenue & Customs (HMRC) what you earn and what you owe. How much you’ll pay depends on your circumstances and the way you’ve chosen to access your savings. If you take the money in a number of different tax years you may pay less tax than if you take it all in one go

It’s also worth thinking about what happens to any money left in your pot after you die. If that happens before the age of 75, any money left in your pension pot will usually pass on tax-free. After that age, any money you leave will be taxable.

Help to understand what tax you’ll need to pay

Tax rules can be complicated, so we’d recommend taking expert advice on how you might be taxed before you make a decision. Pension Wise at MoneyHelper or your local independent financial adviser will be able to help. You can also contact HMRC directly.

Our lump sum tax calculator will give you an at-a-glance guide to how much tax you might pay if you take your pension savings as a lump sum.

Finding out more

• Pension Wise from Moneyhelper
• Independent financial adviser via Unbiased
• HMRC