Taking an income for life with the least tax
Every pound you take from your pension pot is taxed as income, except 25% of it. ISA money is tax-free. See the tax this year on each way of reaching the income you want.
Your answer
Enter the income you want after tax, your pension pot and your ISA savings.
About this calculator
For anyone who has reached the age they can take their pension and wants to know how to take the income they need this year for the least tax.
We look at tax only. We can't tell you how to invest or which product to choose: that's regulated financial advice, and a regulated financial adviser can help. Pension Wise, from the government, gives free guidance.
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
First, what your State Pension, other pensions and savings interest give you after tax, and how much more you need.
Then four ways to find the rest: withdrawals from your pot with 25% of each one tax-free; the whole 25% tax-free lump sum first, then taxable income; your pot up to your tax-free allowance, then your ISA; and your pot up to the top of the basic rate band, then your ISA.
For each, we show what you'd take from each place, the tax this year and what's left. The least tax this year comes first. That isn't always best over your whole retirement, so read the notes.
Worked example
To have £60,000 after tax this year, the least tax is £0, by taking from your pot up to your tax-free allowance and topping up from your ISA.
2026/27 tax year · £60,000 wanted after tax · State Pension £241.30 a week · pot £600,000 · ISA £100,000
| State Pension: £241.30 a week × 52 | £12,548 |
|---|---|
| Interest on savings at 4% | £800 |
| Income tax on these (your first £12,570 is tax-free) | £0 |
| What these give you after tax | £13,348 |
| The income you want after tax | £60,000 |
| Still needed from your pot or ISA | £46,652 |
| 1. Pot up to your tax-free allowance, then your ISA: £30 from your pot (£7 tax-free), £46,623 from your ISA. Tax this year | £0 |
| Left afterwards: pot £599,970, ISA £53,377 | £653,348 |
| 2. Tax-free lump sum first, then taxable income: £150,000 tax-free lump sum (£46,652 spent). Tax this year | £0 |
| Left afterwards: pot £450,000, ISA £100,000, tax-free cash in the bank £103,348 | £653,348 |
| 3. Pot up to the basic rate band, then your ISA: £49,230 from your pot (£12,307 tax-free), £4,803 from your ISA. Tax this year | £7,380 |
| Left afterwards: pot £550,770, ISA £95,197 | £645,968 |
| 4. From your pot, 25% of each withdrawal tax-free: £56,033 from your pot (£14,008 tax-free). Tax this year | £9,381 |
| Left afterwards: pot £543,967, ISA £100,000 | £643,967 |
| Least tax this year: Pot up to your tax-free allowance, then your ISA | £0 |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis.
Questions people ask
Why was so much tax taken from my first pension withdrawal?
Pension providers usually tax the first withdrawal on an emergency tax code, as if you'd get the same every month. You can claim the extra back from HMRC: form P55 if you've taken some of your pot, P53Z if you've taken all of it, or P50Z if you've taken all of it and stopped work.
Should I take my 25% tax-free lump sum all at once?
It's tax-free either way, but once it's in the bank it's no longer in your pension: interest on it can be taxed. If you take withdrawals instead, 25% of each one stays tax-free. Taking only the tax-free lump sum doesn't cut what you can pay into pensions later; taking taxable money does.
Will my pension be taxed when I die?
From 6 April 2027, most unused pension pots count towards your estate for Inheritance Tax. That can change whether it's better to spend your pension or your other savings first. Ask us or a regulated financial adviser.
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