When you get money from a pension you pay tax on any income above your tax-free Personal Allowance.
How much Income Tax you pay depends on the tax rate that applies to you.
Your income includes:
- the State Pension
- money from private pensions (workplace, personal, stakeholder)
- earnings from employment or self employment
- any taxable benefits you might get
- any other income, money from investments, property, savings
How you pay tax depends on your situation. Your pension provider usually takes some tax off before paying you money from a private pension.
Tax-free money from a pension
You can usually take 25% of a pension pot tax free. Your pension provider takes tax off the remaining 75% before you get it.
If your life expectancy is less than a year
You may be able to take your whole pension pot as a tax-free lump sum if you’re under 75 and your life expectancy is less than a year because of serious illness. If you’re over 75, you’ll pay 45% tax on the lump sum.