Tax when you get a pension (2024)

You will not usually pay any tax if your total annual income adds up to less than your Personal Allowance.

Lump sums from your pension

You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. The most you can take is £268,275.

If you hold a protected allowance, this may increase the amount of tax-free lump sums you can take from your pensions.

The tax-free lump sum does not affect your Personal Allowance.

Tax is taken off the remaining amount before you get it.

When you can take your pension depends on your pension’s rules. It’s usually 55 at the earliest.

You might have to pay Income Tax at a higher rate if you take a large amount from your pension. You could also owe extra tax at the end of the tax year.

How you can take your pension

A pension worth up to £10,000

You can usually take any pension worth up to £10,000 in one go. This is called a ‘small pot’ lump sum. If you take this option, 25% is tax-free.

You can usually get:

• up to 3 small pot lump sums from different personal pensions
• unlimited small pot lump sums from different workplace pensions

A pension worth up to £30,000 that includes a defined benefit pension

If you have £30,000 or less in all of your private pensions, you can usually take everything you have in your defined benefit pension or defined contribution pension as a ‘trivial commutation’ lump sum. If you take this option, 25% is tax-free.

If this lump sum is paid from more than one pension, you must:

• have your savings in each scheme valued by the provider on the same day, no more than 3 months before you get the first payment
• get all payments within 12 months of the first payment

If you take payments from a pension before taking the rest as a lump sum, you pay tax on the whole lump sum.

Cash from a defined contribution pension

Check with your provider about how you can take money from a defined contribution pension. You can take:

• all the money built up in your pension as cash
• smaller cash sums from your pension

You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. The most you can take is £268,275.

If you hold a protected allowance, this may increase the amount of tax-free lump sums you can take from your pensions.

You may have to pay a tax charge on money you put into your pension after you withdraw cash.

If your life expectancy is less than a year

You may be able to take all the money in your pension as a tax-free lump sum, if all of the following apply:

• you’re expected to live less than a year because of serious illness
• you’re under 75
• it’s below your lump sum and death benefit allowance

You’ll pay Income Tax on some or all of the lump sum if:

• you’re over 75
• it goes above your lump sum and death benefit allowance

Check with your pension provider. Some pension funds will keep at least 50% of your pension for your spouse or civil partner.