What tax will you pay if you take money out of your pension this year?
A quarter of what you take is usually tax-free; the rest is taxed like pay, on top of your other income. See the tax, what your pension company may take too soon, and how to get it back.
Your answer
Enter your age, what your pot is worth and how much you'll take to see the tax.
About this calculator
For anyone aged 55 or over thinking about taking money out of a pension pot. It shows how much is tax-free and how much is taxed, the extra income tax this year, the tax your pension company is likely to take from a first payment, how much of that you could claim back and on which form, and whether taking money lowers the most you can pay into a pension each year.
It doesn't say whether you should take the money out. Pension Wise gives free, government-backed guidance on your options. It works for England, Wales and Northern Ireland.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
A quarter of what you take is usually tax-free, up to a lifetime limit of £268,275 of tax-free cash. The rest is added to your other income for the tax year and taxed in slices, so a big payment can push part of it into the 40% slice and shrink your tax-free allowance once your income goes over £100,000. We work out the tax with and without the payment; the difference is what it costs.
On a first payment your pension company doesn't have your tax code, so it uses the emergency code as if you'd get the same amount every month. That usually takes far too much. You can claim it back: on form P55 if you took part of your pot, P53Z if you took all of it and still have other pay or pension, P50Z if you took all of it and have stopped work, or P53 for a small pot. If you don't, HMRC looks at it after the tax year ends.
Worked example
Taking £20,000 out of your pension would cost about £3,000 in income tax this year.
2026/27 tax year · England, Wales or Northern Ireland · one-off payment, a quarter tax-free · other income all pay or pensions · first payment on the emergency code
| Money you take out of your pension pot | £20,000 |
|---|---|
| Tax-free part: a quarter, up to the £268,275 limit | − £5,000 |
| Taxed part, taxed like pay on top of your other income | £15,000 |
| Your other taxable income this tax year | £30,000 |
| Tax-free allowance: £12,570 | £12,570 |
| Income tax on your other income alone | £3,486 |
| Income tax on your other income and this payment together | £6,486 |
| Extra income tax caused by this payment | £3,000 |
| Tax your pension company will probably take off a first payment (emergency code, as if it came every month): £15,000 less £1,048.26 tax-free leaves £13,951, taxed at a twelfth of each band | £5,128.20 |
| Too much taken: £5,128.20 − £3,000, to claim back | £2,128.20 |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis. The tax on a first payment follows HMRC's month 1 method for the emergency code.
Questions people ask
Why does my pension company take so much tax from the first payment?
It doesn't know your tax code yet, so it taxes the payment as if you'd get the same amount every month for the rest of the year. That takes much more than you really owe. You can claim the extra back online or by post, and HMRC also checks it after the tax year ends.
Does taking only the tax-free cash lower my yearly pension limit?
No. Taking only the tax-free cash, or cashing in a small pot, doesn't. A one-off payment or income from drawdown does: the most that can go into your pensions each year without extra tax falls from £60,000 to £10,000, and stays there.
Can I take money out before I'm 55?
Almost never. Taking it early is usually not allowed and can mean a very large tax bill. Be careful with anyone who offers early access. We can't work out a figure, so please talk to an adviser first.
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