Paying tax on your pension

If you recently started to pay tax

The tax you are eligible to pay is dependant upon your total income and personal tax allowances. If you are now paying tax it is likely your tax code has changed or your income is over your stated allowance.

Please see GOV.UK: Tax codes - What your tax code means for an explanation of your tax code.

Your tax code will change if you begin to receive a second income such as:

  • a salary from a new job
  • another pension coming into payment
  • your State Pension coming into payment

Should you have a second income your tax code may change if HMRC split your tax allowance between your incomes so you pay a smaller amount of tax across both. If your tax code does not change your allowance may be fully applied to your pension income and you will receive no allowance on your other income.

When your State Pension comes into payment your tax code will reduce. The State Pension cannot be taxed at source so the amount of State Pension you receive will reduce your taxable allowance by that amount. Your remaining taxable allowance will be applied to your other incomes.

If you feel you are paying an incorrect amount of tax please contact HMRC directly.