UK Pension Tax Guide

The UK State Pension is taxable, but it is paid without tax being deducted at source. Tax is usually collected through PAYE on a private pension, salary, or through Self Assessment. This guide explains how the main UK pension types are taxed and which forms to check.

Key takeaways

The State Pension is taxable income, even though it is paid gross.
HMRC usually collects the tax by adjusting the tax code on another pension or job.
A P60 shows the State Pension paid and any tax deducted in the tax year.
NHS and other public-sector pensions are taxable; the tax-free lump sum rules are separate.
Lump sums, survivors’ benefits, and Self Assessment depend on the specific scheme and your circumstances.

1. Is the State Pension taxable?

Yes. The State Pension counts as taxable income for UK income tax. It is paid without tax being taken off, so the tax is collected elsewhere: normally by reducing your tax-free allowance on a private pension or salary through your tax code, or through Self Assessment if you have no other taxed income.

If your total income is below your personal allowance, you may not pay tax. If the State Pension uses up part or all of your allowance, HMRC can adjust the tax code on another income source. The result can be a lower net private pension payment rather than a separate tax bill.

2. How the tax is collected

Most pensioners have tax collected through PAYE. HMRC issues a tax code to the pension payer, and the payer deducts tax from the private or workplace pension. The State Pension itself is not taxed at source, so the code on the other pension is adjusted to recover the tax due.

If you have no other taxable income, or if the PAYE adjustment is not enough, HMRC may ask you to file a Self Assessment return. Self Assessment is also used for untaxed income, large pension lump sums, and some foreign pension income.

3. P60 and Personal Tax Account

A P60 summarises the State Pension paid and tax deducted in the tax year. You can view or download it through your Personal Tax Account or the HMRC app. If you have a private pension, you may receive a separate P60 from that payer.

Check that the State Pension figure on your P60 matches the payments you received. If it does not, contact the Pension Service or HMRC before filing. A wrong figure can change your tax code and the tax due.

4. NHS and public-sector pensions

NHS, civil service, local government, police, and teacher pensions are generally taxable as pension income. Contributions usually receive tax relief when paid, and the pension is taxed when received. A tax-free lump sum may be available under the scheme rules, but the lump sum and the annual pension are taxed differently.

Public-sector schemes can also produce annual allowance or lifetime allowance questions. The lifetime allowance was replaced by new lump sum allowances from April 2024; check the current scheme guidance rather than relying on older figures.

5. Lump sums and trivial commutation

A pension commencement lump sum is usually tax-free up to 25% of the pension pot, subject to the lump sum allowance (the standard maximum is £268,275 unless you have protection). Other lump sums, such as trivial commutation or serious ill-health commutation, have their own conditions. The tax treatment depends on the type of payment and the scheme rules.

Do not assume that every lump sum is tax-free. Ask the scheme administrator which type of payment it is and how it will be reported. If a lump sum pushes you into a higher tax band, the tax may be collected through Self Assessment or a changed tax code.

6. Survivors and beneficiaries

Survivors’ pensions and dependants’ benefits are generally taxable in the hands of the person who receives them. Death benefits can be tax-free or taxable depending on the scheme, the member’s age at death, and the way the benefit is paid. The scheme administrator should explain the reporting.

7. Self Assessment and payments on account

You may need Self Assessment if you have untaxed income, a large lump sum, foreign pension income, or a tax bill that PAYE cannot collect. The return is also used to claim reliefs and to report pension income that was not taxed correctly.

If you file, check whether payments on account apply. They are advance payments toward the next year’s tax bill and can surprise pensioners whose income has changed.

8. Common errors

Assuming the State Pension is tax-free because it is paid gross.
Not checking the tax code on a private pension after the State Pension starts.
Using an old P60 or an old personal allowance figure.
Treating a taxable lump sum as tax-free.
Missing the Self Assessment deadline because the tax was not collected through PAYE.

Scotland and Wales

Income tax rates are not identical across the UK. Scottish taxpayers pay Scottish rates and bands on pension income that is not savings or dividends. Welsh taxpayers pay Welsh rates, which are set separately. The State Pension is taxable under the same framework, but the rates applied depend on where you are treated as resident for tax purposes.

If you move between Scotland, Wales, England, or Northern Ireland, tell HMRC and check your tax code. The same pension can produce a different net amount after a move.

Tax code worked example

Assume a personal allowance of £12,570, a State Pension of £11,500, and a private pension of £10,000. The State Pension uses most of the allowance, leaving about £1,070 of allowance to set against the private pension. HMRC may issue a tax code around 107P for that pension. The private pension is then taxed on roughly £8,930, with the exact result depending on the code and the year.

This is illustrative, not a calculation for your case. The personal allowance, State Pension, and tax rates can change; use the figures on your P60 and the current HMRC guidance.

Income source	Taxed how	What to check
State Pension	Taxable, paid gross; collected via tax code or Self Assessment	P60 figure and Personal Tax Account
Private/occupational pension	PAYE on the pension; code adjusted for State Pension	Tax code and payslips
NHS/public-sector pension	PAYE; scheme-specific lump sum rules	Scheme P60 and lump sum statement
Lump sum	Tax-free only if it is a permitted type and within limits	Scheme statement and type of payment

Marriage Allowance

Marriage Allowance lets one spouse or civil partner transfer part of their personal allowance to the other. It can reduce tax for a couple where one partner has unused allowance and the other pays basic-rate tax. It is not available if the recipient pays higher or additional rate tax, and it must be claimed.

Check the current eligibility and amount on GOV.UK before claiming. The allowance can also affect the tax code used against a pension.

What to do if the tax code looks wrong

Check the code on the P60, payslip, or pension statement against the Personal Tax Account.
Look for an “untaxed income” adjustment for the State Pension or a previous underpayment.
Contact HMRC if the State Pension figure or another income source is wrong; do not wait for the year-end.
If a lump sum or new pension starts, check whether the code needs updating.

Pension lump sums and annual allowance

The annual allowance limits the tax-relieved pension savings you can make in a year. If you exceed it, a tax charge may apply; some schemes offer “scheme pays,” where the charge is taken from the pension. Lump sums have separate allowances and conditions. The rules are technical, so check the current HMRC guidance and your scheme statement before taking a large payment.

Foreign pensions

If you are UK resident, you are generally taxable on your worldwide pension income, including a foreign pension. A double-tax treaty may give relief for foreign tax paid. Report the income correctly and keep the foreign tax evidence; the treatment depends on the treaty and the pension type.

Death benefits

Death benefits depend on the scheme. A defined contribution pot may be paid as a beneficiary drawdown or lump sum, with tax treatment that depends on the member’s age at death and the way it is paid. A defined benefit survivor pension is generally taxable in the recipient’s hands. The scheme administrator should explain the reporting.

Records to keep

P60s from the State Pension and each private pension.
Tax-code notices and HMRC letters.
Lump sum statements and scheme payment types.
Foreign pension and tax records, if applicable.

Tax-year checklist

Compare the State Pension figure on the P60 with the Personal Tax Account.
Check the tax code on each private pension and on any new pension that started.
Identify whether any lump sum was a permitted tax-free type or a taxable payment.
Check whether Self Assessment is required for untaxed income or a large lump sum.
Keep HMRC letters and scheme statements with the year’s tax records.

Check your State Pension forecast

The GOV.UK forecast shows your State Pension age and an estimate based on your National Insurance record. It is not a tax calculation, but it helps you check whether the State Pension figure on your P60 is plausible. If the forecast and the P60 disagree, contact the Pension Service before filing.

What counts as pension income

State Pension.
Workplace and private occupational pensions.
Annuities and income drawdown payments.
Foreign pensions, subject to treaty relief.
Lump sums, which may be tax-free or taxable depending on type.

Not every payment is taxed the same way. A tax-free lump sum is not the same as a taxable lump sum, and a survivor pension is taxed to the person who receives it.

Where to check current rates

Use GOV.UK for the current personal allowance, income tax rates, and Scottish/Welsh rates. Do not rely on figures from an old P60 or a previous tax year. The rates and thresholds can change, and the devolved rates are set separately.

Questions to ask your scheme

Is this payment a periodic pension, a lump sum, or a survivor benefit?
Is the lump sum a permitted tax-free type, or is it taxable?
What tax code will the scheme use, and does it account for the State Pension?
What will the P60 show for this tax year?
Will the scheme report the payment to HMRC, or do I need Self Assessment?

9. Official Sources

Related guides

Last reviewed: 11 November 2026.

This guide is general information, not tax advice. Confirm your own position with HMRC, your scheme administrator, or a qualified adviser.