When you retire, your retirement income tax, the amount of tax you pay on money you receive after stopping work. Also known as pension taxation, it’s not just about your state pension—it includes workplace pensions, private savings, ISAs, and even part-time job earnings. Many people assume retirement means no taxes, but that’s not true. The UK lets you earn up to £12,570 a year tax-free (the personal allowance), but anything above that gets taxed—no matter if it’s from a pension, annuity, or withdrawals from a SIPP.
Your UK state pension, the government payment you get after reaching state pension age. It’s taxable income, even though it’s paid without tax taken at source. That means if you have other income—like a private pension or rental income—it could push you over the tax-free threshold. Then there’s tax-free allowances, the portions of your retirement savings you can access without paying tax. For example, you can usually take 25% of your pension pot as a lump sum without paying income tax. But the rest? It’s added to your other income and taxed at your marginal rate. People often miss this and end up paying more than they should because they don’t plan how they withdraw money.
Retirement isn’t just about how much you saved—it’s about how you take it out. Taking too much too soon can bump you into a higher tax band. Drawing from your ISA first? That’s smart—it’s tax-free forever. But pulling from your pension first? You might trigger higher tax bills that could’ve been avoided. And if you’re still working part-time while collecting a pension? That income stacks up. You don’t get a special retirement tax break—you just get taxed like everyone else, but now on a tighter budget.
There’s no one-size-fits-all rule. Someone with a £20,000 state pension and £10,000 from a private pension will pay tax. Someone with £8,000 from a pension and £15,000 from an ISA won’t. The difference isn’t luck—it’s planning. The posts below show real cases: how much people actually pay, what traps to avoid, and how to stretch your money without overpaying the taxman. You’ll see what works for people living on pensions in 2025, what HMRC really looks at, and how to use your allowances properly—so you keep more of what you earned.
In New Zealand, Superannuation and KiwiSaver withdrawals are tax-free, but other retirement income like dividends or foreign pensions may be taxed. Know what counts as taxable income in retirement.
