Pension Withdrawal Tax Calculator

Usually 25% of a withdrawal is tax-free (up to the £268,275 lump sum allowance) and the rest is taxed as income.

Updated 2026-10-03 · 2026/27 HMRC rates

You receive after tax£17,000Tax £3,000 · 15.0% of the withdrawal

Tax-free part	£5,000
Taxable part	£15,000
Income tax due for the year	£3,000
Likely emergency tax on a first one-off payment (Month 1)	£5,129
Over-taxed amount to reclaim (P55/P53/P50Z)	£2,129

Pot after withdrawal: £20,000. First flexible withdrawals usually trigger the Money Purchase Annual Allowance (£10,000).

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Key facts

The personal allowance stays at £12,570 in 2026/27 and is reduced by £1 for every £2 of adjusted net income over £100,000, so it is gone entirely at £125,140 (HMRC income tax rates and allowances).
In England, Wales and Northern Ireland, 2026/27 income tax is 20% on the first £37,700 of taxable income, 40% up to £125,140 and 45% above that (HMRC rates and thresholds for employers 2026 to 2027).
Scotland has six bands in 2026/27: 19% starter on the first £3,967 of taxable income, 20% basic to £16,956, 21% intermediate to £31,092, 42% higher to £62,430, 45% advanced to £125,140 and 48% top above that (HMRC rates and thresholds for employers 2026 to 2027).
Budget 2025 extended the freeze on income tax thresholds and the equivalent employee and self-employed National Insurance thresholds for a further three years, from April 2028 to April 2031 (HM Treasury Budget 2025).
Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year and 2% above that in 2026/27 (HMRC rates and thresholds for employers 2026 to 2027).
Employers pay 15% National Insurance on earnings above the £5,000 secondary threshold, and eligible employers can claim an Employment Allowance of £10,500 (HMRC rates and thresholds for employers 2026 to 2027).
Self-employed people pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that; voluntary Class 2 costs £3.65 a week if profits are below £7,105 (GOV.UK self-employed National Insurance rates).
Dividend tax rose by 2 percentage points from April 2026: the basic rate is now 10.75% and the higher rate 35.75%, while the additional rate stays at 39.35% and the dividend allowance stays at £500 (GOV.UK tax on dividends).

Pension tax relief

When you can take money from a pension

Most people can start taking money from a personal or workplace pension at 55. Under the Finance Act 2022, the normal minimum pension age rises to 57 on 6 April 2028. Some members keep a protected lower pension age if their scheme rules gave them a right to take benefits earlier, and uniformed services schemes for the armed forces, police and firefighters are not affected.

If you are approaching 55 now, check your scheme rules before planning a withdrawal around that birthday. Someone who turns 55 after 5 April 2028 without a protected age will have to wait until 57.

Ways to take a defined contribution pension

How you take the money decides how much is tax-free and when the rest is taxed.

Tax-free lump sum then drawdown: take up to 25% tax-free at the start, capped by the £268,275 lump sum allowance, and leave the rest invested. Later withdrawals are fully taxable.
Lump sums as you go: take cash in smaller amounts, each normally 25% tax-free and 75% taxable.
Small pot lump sum: a pot of £10,000 or less can be cashed in whole, with 25% tax-free.
Trivial commutation: if all your pensions total £30,000 or less, you may be able to take a defined benefit or defined contribution pension as a single lump sum.
Annuity: use the pot to buy a guaranteed income, which is taxed through PAYE like a salary.

Why spreading withdrawals usually saves tax

The taxable part of a withdrawal is added to your other income for that tax year. Taking it all in one year can push it into the higher rate, while spreading it lets you use several years of Personal Allowance and basic-rate band.

Example with no other income: a £40,000 pot taken in one go has £10,000 tax-free and £30,000 taxable, costing about £3,486 in income tax. Taken as £10,000 a year over four tax years, each year's taxable £7,500 is inside the Personal Allowance, so the tax is £0.

The State Pension changes this picture. The full new State Pension of £241.30 a week is about £12,548 a year, which uses up almost all of the £12,570 allowance. Once you receive it, nearly every pound of taxable pension withdrawal is taxed at 20% or more. Taking taxable withdrawals before State Pension age, when your allowance is free, is a common way to reduce lifetime tax.

Emergency tax on the first withdrawal, and how to reclaim it

Providers often tax the first flexible payment on an emergency Month 1 basis because they do not have a tax code for you. That treats the payment as if you will receive it every month, giving you one twelfth of the allowance and bands. A £10,000 taxable withdrawal is taxed at about £2,953 on that basis, against £0 if it were your only income in the year.

You can wait for HMRC to correct it through your tax code or a P800 after the year ends, or claim it back sooner with the right form:

P55: you took some, but not all, of your pot and will not take more this tax year.
P53Z: you emptied the pot and have other taxable income, such as a salary or other pension.
P50Z: you emptied the pot and have no other income and no taxable benefits.

Before you withdraw: points that are easy to miss

These rules catch people out after a first withdrawal.

Taking taxable cash triggers the money purchase annual allowance, limiting future defined contribution savings to £10,000 a year. Taking only the tax-free lump sum and leaving the rest in drawdown does not.
The £268,275 lump sum allowance is a lifetime limit across all your pensions, not per pot.
Withdrawals count as income for the High Income Child Benefit Charge, the £100,000 allowance taper and means-tested benefits.
No National Insurance is charged on pension income.
Be wary of unsolicited offers to unlock a pension before 55. Unauthorised payments are taxed heavily by HMRC on top of any loss to fraud.

Frequently asked questions

Why was I emergency taxed on my pension?

Providers often use an emergency Month 1 code for the first payment, which assumes you will get that amount every month. Reclaim it with form P55, P53Z or P50Z, or wait for HMRC to correct it.

How much tax will I pay on a £20,000 pension withdrawal?

If it is your only income and you take it as a lump sum, £5,000 is tax-free and £15,000 is taxable, for about £486 of income tax over the year. The first payment may be overtaxed under an emergency code and then refunded.

What age can I access my private pension?

Usually from 55, rising to 57 on 6 April 2028, unless you have a protected pension age under your scheme rules.

Can I take my 25% tax-free cash in instalments?

Yes. You can take smaller lump sums where 25% of each is tax-free, or move parts of your pot into drawdown in stages, each time taking 25% tax-free.

Does taking my pension affect my State Pension?

No. The State Pension is not reduced, but both count as taxable income in the same year, which can raise the tax on your withdrawals.

Sources

Figures are taken from official government publications and were last reviewed on 2026-10-03.