Do you pay tax on your pension? The short answer is yes, income from pensions is taxed like any other kind of income. You have a personal allowance (£12,570 for the 2023/24 tax year) on which you pay no income tax, and then you pay 20% tax on income of between £12,571 to £50,270 before higher rate tax kicks in.

For the 2025/2026 tax year, the standard Personal Allowance for pensioners in the UK is £12,570. This is the amount of income you can receive from all sources—including the State Pension, private pensions, and part-time work—before you start paying Income Tax. It is important to note that the State Pension is taxable, so if your total income exceeds £12,570, the tax is usually collected through "Pay As You Earn" (PAYE) on your private pension or through Self Assessment. Pensioners may also benefit from the Personal Savings Allowance, which allows basic-rate taxpayers to earn up to £1,000 in interest tax-free, and the Dividend Allowance, which is £500 for 2026. If you were born before April 6, 1935, you might also be eligible for the Married Couple’s Allowance, which can reduce your tax bill by between £427 and £1,108 per year. However, the standard personal allowance begins to taper off if your total adjusted net income exceeds £100,000, eventually reaching zero at £125,140.