Understanding tax and your pension
Find out how tax works on pensions, savings and additional income, before and after you retire.
Tax on pensions, savings and additional income can be confusing. The way you pay tax depends on the kind of pension you get, and whether you have any other income.
This guidance brings together some of the most common queries and concerns, and provides you with reassurance on how some of our processes work.
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Understanding tax when you get a pension
Whether you receive a State Pension, a private pension or a workplace pension, you may have to pay tax.
You pay income tax if your total annual income, including any pensions, adds up to more than your Personal Allowance (the amount of income you do not have to pay tax on).
If you鈥檙e taking a private pension, you may be able to take a lump sum of money free from Income Tax. Read about聽the rules surrounding Individual Lump Sum Allowances聽for more details.
You can check if you may have to pay tax on your pension.
Read about聽tax when you get a pension聽for more detailed information.
Understanding tax when you have other sources of income
The way you pay tax depends on the kind of pension you get, and whether you have any other income.
If you continue to work
You may be working while claiming your State Pension, private pension or workplace pension.
Your private pension or workplace pension provider will deduct any tax due before they make payments to you.
Your employer will usually take any tax you owe off your income. To understand how this works, read about tax when you get a pension 鈥� how your tax is paid.
You can聽check if the tax on your payslip is correct.
You may have a different tax code on any:
- private pensions
- workplace pensions
- other sources of employment
If you are self-employed you may need to fill in a聽Self Assessment tax return.
Tax when you have shares
Income you earn from an ISA is not taxable. However if you buy or sell shares and receive income from them you may have to pay tax. You may also have to pay tax on dividends for any shares you own. Read about:
Savings interest and tax
You can earn some interest from your savings without paying tax. However, there are some rules (allowances) that apply. It鈥檚 important to be aware of this, to avoid unexpected bills at the end of the tax year.
Read about tax on savings interest and how much tax you pay.
Taxable and tax-free state benefits
Some state benefits are taxable. Read more about tax-free and taxable state benefits.
Get help with your Simple Assessment letter
You may get a Simple Assessment letter by post, or to your personal tax account if you have one, asking you to pay Income Tax.
HMRC聽may send you a聽Simple Assessment tax bill if you:
- go over your Personal Allowance and have tax to pay on your State Pension
- owe Income Tax that cannot be automatically deducted from your income
- owe us 拢3,000 or more
This letter will tell you how much you owe and how to pay your Simple Assessment tax bill.
Telling HMRC about a change in circumstances
From time to time you may need to tell us about changes to your circumstances.
These changes may be minor, such as a change of name or address. However, some changes may impact your financial position. We have support to help you understand these circumstances.
Changing your name or address
You can use your HMRC app or online account to change your name or address, without needing to call us. You鈥檒l need to sign in. If you do not already have sign in details, you鈥檒l be able to create them.
If you cannot notify us of these changes using the HMRC app or personal tax account, you can contact us to change your address and personal details.
Dealing with your benefits, tax and pension after the death of a husband, wife or partner
We understand that dealing with the death of a loved one can be difficult. Your financial position may change as a result of this, so it鈥檚 important to be aware of how this may impact you.
Read about your benefits, tax and pension after the death of a partner and tax on property, money and shares you inherit for support.
How Capital Gains tax works when downsizing or selling your property
Downsizing or selling a home can be a big change. It鈥檚 important that you鈥檙e aware of any Capital Gains tax that may apply to you.
Read about:
- tax when you sell your home if you鈥檙e selling your home
- tax when you sell property if you鈥檙e selling a property that鈥檚 not your home
Tax if you decide to move abroad
You need to tell us if you鈥檙e:
- leaving the UK to live abroad permanently
- going to work abroad full-time (including for a UK-based employer) for at least one full tax year
- a foreign national leaving the UK
This is because moving abroad can affect your tax. For more information about what this means to you and how to tell us, read about聽tax if you leave the UK to live abroad.