Pension Income Tax Calculator UK 2025/26

Pension income tax calculator UK 2025/26 — calculate tax on state pension, drawdown, annuity income. Includes 25% tax-fr

Quick answer: Pension income above your Personal Allowance (£12,570 in 2025/26) is taxed at marginal rate: 20% basic, 40% higher, 45% additional. State Pension £230.25/week = £11,973/year uses most of your PA — additional pension income is taxed.
Mustafa Bilgic
Reviewed by Mustafa Bilgic · UK Calculator Editor ·

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Pension income from state pension, drawdown, annuities, and final salary schemes is taxable as income. The first 25% of a defined contribution pension is tax-free (up to £268,275 LSA). This calculator shows your tax liability on combined pension income for 2025/26.

How pension income tax calculator works in 2025/26

Pension tax has 3 layers:

  1. 25% tax-free cash — first 25% of your DC pension pot is tax-free, capped at £268,275 (Lump Sum Allowance, LSA) since April 2024
  2. 75% taxable — remainder taxed as income at marginal rate
  3. State pension — fully taxable, paid before tax (you may need to pay tax via Self Assessment)

Drawdown options 2025/26:

  • Flexi-Access Drawdown (FAD) — take 25% TFC upfront, leave rest invested, draw taxable income flexibly
  • Uncrystallised Funds Pension Lump Sum (UFPLS) — each withdrawal 25% TFC + 75% taxable
  • Annuity — exchange pot for guaranteed income for life. 25% TFC available; income fully taxable
  • Small pots (3 × £10k) — take entire pot as 75% taxable lump sum, no triggering MPAA

Once you flexibly access taxable income, you trigger the Money Purchase Annual Allowance (MPAA) of £10,000 — your future pension contributions are limited.

Worked example: Full state pension only £11,973/year

Below PA £12,570. Tax £0. Net £11,973.

Gross: £11,973 → Take-home: £11,973.00/year (£997.75/month)

Worked example: State pension £11,973 + £20k drawdown

Total income £31,973. PA £12,570. Taxable £19,403 at 20% = £3,880.60. Net £28,092.40 (state £11,973 + £16,119.40 net drawdown). NB: NI not paid on pension income (above state pension age).

Gross: £31,973 → Take-home: £28,092.40/year (£2,341.03/month)

Worked example: State pension £11,973 + £40k drawdown + £100k TFC taken upfront

TFC £100k tax-free (within £268,275 LSA). Annual income: £51,973 total. PA £12,570. Taxable £39,403. Tax: £37,700 × 20% = £7,540 + £1,703 × 40% = £681 = £8,221. Net annual £43,752.

Gross: £51,973 → Take-home: £43,752.00/year (£3,646.00/month)

Frequently asked questions

Is state pension paid before or after tax?
State Pension is paid GROSS (before tax). HMRC adjusts your tax code to collect tax via your other PAYE income or via Self Assessment. If you have only state pension below PA, no tax is owed.
What is the Lump Sum Allowance (LSA)?
LSA = £268,275 (April 2024+) — replaces the old Lifetime Allowance. It caps the 25% tax-free cash you can take from DC pensions across all schemes. Anything above LSA is taxable at your marginal rate.
What's the Lump Sum and Death Benefit Allowance (LSDBA)?
LSDBA = £1,073,100. Caps the total tax-free benefits paid on serious ill-health or death before age 75. Above LSDBA, lump sums are taxable at marginal rate of recipient (or 45% if discretionary trust).
What is the MPAA and how does it affect future contributions?
MPAA = £10,000/year cap on future pension contributions, triggered when you flexibly access pension income (FAD income, UFPLS). Doesn't apply if you only take 25% TFC. Designed to prevent "recycling" — taking out and re-contributing.
Do I pay NI on pension income?
No — Once you reach state pension age, you stop paying employee Class 1 NI. Pension income (state, drawdown, annuity) is exempt from NI. Income tax still applies.
Can I take all my pension at once?
Yes — but expensive if pot is large. £400k pot all at once: £100k TFC + £300k taxable = total income £300k+. Pushes you into 45% additional rate. Spreading over years saves £30-100k tax. Only "small pots" (≤£10k) can be taken whole without significant tax penalty.
How is annuity income taxed?
Lifetime annuity income is fully taxable as income at marginal rate. PCLS (25% tax-free cash) can usually be taken upfront. Purchased life annuities (non-pension) have a tax-free capital element + taxable income element — different rules.

Official UK Sources

Last reviewed: May 2026 against HMRC 2025/26 rates.

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