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Pensions come with tax relief going in and tax rules coming out. These guides explain relief, allowances, the tax-free lump sum, emergency tax and how pension income is taxed.
Talk to an adviser before you choose →For a defined benefit pension, the annual allowance tests the rise in value of your promised pension in the tax year, not what is paid in.
Company pension contributions are normally deductible for corporation tax if paid wholly and exclusively for the trade, in the period they are paid.
Employer pension contributions are not taxed as your pay or as a benefit in kind, but they count towards the annual allowance.
Pension tax in the UK has three stages: money paid in gets tax relief, growth inside is largely tax-free, and most of what you take out is taxed as income.
You can pay dividend income into a pension, but tax relief is capped by your earnings, and dividends, interest and rent are not counted as earnings.
You cannot transfer your pension allowance to your spouse: HMRC sets each allowance for the individual, so a couple has two separate limits, not one to pool.
Your State Pension goes on a Self Assessment tax return in box 8, as what you were entitled to for the year, not what landed in your account.
Does salary sacrifice affect pension annual allowance? It does not lower the limit, but what your employer pays in counts towards it.
Enhanced protection was a 2006 HMRC shield from the lifetime allowance charge, open at any pot size. Since April 2024 it lifts tax-free lump sum limits.
The pension annual allowance tax charge is income tax on pension saving over your allowance, at your own rates. How it is worked out, paid and avoided.
How are small pot pensions taxed? As income: 25% is tax-free if the pot has not been drawn on, the rest is taxable, and tax comes off before you are paid.
Pension carry forward rules let you add unused annual allowance from the previous three tax years to this year’s, for years you were in a pension scheme.
Pension drawdown tax: up to 25% can come out tax-free, to a £268,275 cap. The rest is taxed as income, and the first payment often gets emergency tax.
Your pension tax-free lump sum is usually up to 25% of what you have built up, capped at £268,275 in total; the rest is taxed as income.
Pension salary sacrifice tax rules: Income Tax relief stays, National Insurance is saved on the pay you give up, and a £2,000 cap on that saving starts in…
A pension tax refund of emergency tax is claimed from HMRC online or by post, on the form that fits how much of your pot you took, or comes after the year.
No, Pension Credit is not taxable: the law lists it as exempt from Income Tax. The State Pension is taxable, though it is paid with no tax taken off.
Is a UK pension taxed in Australia? Under the UK-Australia treaty a pension is taxable only in the country where you live, with exceptions.
Is a UK pension taxable in Canada? Yes: the UK-Canada treaty leaves regular UK pension payments, State Pension included, to Canada if you live there.
Is my armed forces pension taxable? The monthly pension is, through PAYE; scheme lump sums, the EDP lump sum and service injury awards are tax-free.
Pension growth is largely tax free: HMRC says most investment growth inside a registered UK pension scheme is exempt from income tax and capital gains tax.
Is an ill health pension taxable? Usually yes: a scheme pension is income, though a serious ill-health lump sum and some injury pensions can be tax-free.
Is pension advice tax deductible? HMRC's rules give tax-free routes instead: a £500 allowance from your pot, and £500 an employer can cover.
Yes, the State Pension is taxable income, but it is paid in full with no tax deducted; tax is due only when your yearly total passes your Personal Allowance.
The pension lifetime allowance was abolished on 6 April 2024; the lump sum allowance and lump sum and death benefit allowance now apply instead.
A limited company can pay into a director's pension. The limit that usually matters is the director's annual allowance, £60,000 in 2026/27, plus any carry…
The pension lump sum and death benefit allowance is £1,073,100: one cap on tax-free lump sums, counting tax-free cash, ill-health and death lump sums.
The money purchase annual allowance is the £10,000 a tax year that can go into defined contribution pensions tax-charge free after flexible access.
An NHS pension lump sum comes automatically from 1995 Section service and by choice from the 2008 Section and 2015 Scheme, tax free within HMRC's limits.
NHS pension tax relief comes through payroll: contributions leave your pay before income tax is worked out, so relief arrives at your marginal rate.
Each QROPS transfer is tested against the overseas transfer allowance, usually £1,073,100: 25% is due on any excess, or on the whole sum if not exempt.
Pension redundancy sacrifice: your employer pays some redundancy money into your pension, tax and National Insurance free within the annual allowance.
The pension annual allowance is the most you can save across all your pensions in a tax year before tax is due: £60,000 in 2026/27, lower for some.
Pension recycling means using tax-free cash to pay back into a pension for extra tax relief; HMRC can treat it as an unauthorised payment.
Pension salary sacrifice changes from April 2029: only the first £2,000 sacrificed each year stays free of National Insurance, and an Act backs this.
Pension tax relief after 75: you can still pay into a pension, but contributions paid after you reach 75 do not qualify for member tax relief.
Pension tax relief for the self-employed arrives as 20% added by your provider, with any higher-rate relief claimed on your tax return.
With no income you can still get pension tax relief: a relief at source pension adds 20% to payments of up to £2,880 a year, making £3,600.
Primary protection for pensions was open to people with over £1.5 million saved on 5 April 2006. It now raises both tax-free lump sum allowances.
Pension tax relief under net pay, relief at source and salary sacrifice reaches you differently; low earners on net pay can get an HMRC top-up.
Retirement annuity contract tax relief is either added by the provider or claimed through your tax return, and is limited to your earnings for the year.
SIPP borrowing rules in short: a SIPP can borrow up to 50% of its net value, the excess is taxed, and a loan from it to you is taxed too.
Do SIPPs need to be registered with HMRC? The pension itself must be, and the provider arranges it; if it is not, you do not get tax relief.
SSAS pension HMRC rules: HMRC registers the scheme and applies its tax rules, The Pensions Regulator registers the trustees, and the FCA does not regulate it.
The pension annual allowance taper takes £1 off a high earner's allowance for each £2 of adjusted income above £260,000 in 2026/27, down to £10,000.
A QROPS tax-free lump sum can still meet UK tax charges for a set number of years, on top of the tax rules where the scheme is based and where you live.
The US UK pension tax treaty leaves most regular UK pensions paid to a US resident taxable only in the US, but not lump sums or most government pensions.
UK pension tax in Ireland: under the UK-Ireland tax treaty, a UK pension is generally taxable only in the country where you live, but you have to claim the…
UK pension tax in Spain: for a Spanish tax resident the UK-Spain treaty leaves most pensions to Spain, but UK government pensions stay with the UK.
Fixed protection is an HMRC protection from the old lifetime allowance charge, in 2012, 2014 and 2016 versions. Today its main effect is on how much tax-fr…
Individual protection covered pensions worth over £1.25 million in 2014 or £1 million in 2016. Today it can raise your tax-free lump sum limits.
Pension tax relief means money paid into a registered pension is largely free of income tax, up to limits. How it reaches you depends on your scheme.
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