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Is pension drawdown taxable?

You will usually have to pay tax on any regular income or lump sum you receive from a pension, above any tax-free cash you’re entitled to, in the same way as you pay tax on your earnings. How much you pay depends on your total income and the income tax rate(s) that apply to you.

For drawdown:

  • 25% (a quarter) of your pot can normally be taken tax-free
  • other withdrawals will be taxed whether it is taken as regular income or lump sums 

Your pension provider will normally apply tax before the money is paid to you, just like money received from an employer.

Read our guide on how pension withdrawals are taxed to help you understand how this works.

Find out more about taking tax-free cash or use our tax calculator for an indication of how much tax you might have to pay.