Pension drawdown calculator
Pension drawdown pays out 25% of each withdrawal tax-free, with the rest taxed as income at the marginal rate, under gov.uk's rules on tax when a pension is received. On a £20,000 withdrawal with no other income, the estimated amount kept is about £19,514. The first payment is often over-taxed under an emergency code.
How is pension drawdown taxed?
Drawdown keeps the pension invested and allows money to be taken out as needed. The first 25% of what is taken is free of tax, under gov.uk's rules on tax when a pension is received. The remaining share counts as income for the year and is taxed at the marginal rate, on top of any salary, State Pension or other income already received. There is no National Insurance on pension income, which is one reason drawdown after State Pension age can be efficient.
What would a worked example look like?
Take £20,000 from a £200,000 pot with no other income this year. £5,000 of it is tax-free. The other £15,000 is taxable, but it sits inside the Personal Allowance and basic-rate band, so the tax is only £486. The estimated amount kept is £19,514. The catch is the first payment: on an emergency code the provider might tax it as though £20,000 were withdrawn every month, leaving about £14,400 at first. The £5,114 difference can be reclaimed from HMRC.
How can a large withdrawal push me into a higher tax band?
The taxable share is added to other income, so a large single withdrawal can push part of it into the 40% band even where normal income is modest, under gov.uk's Income Tax rates rules. Spreading withdrawals over several tax years, and keeping each year's taxable slice within the basic-rate band where possible, is the simplest way to hold the tax down.
Common questions
How is pension drawdown taxed?
Each withdrawal is normally 25% tax-free and 75% taxable. The taxable 75% is added to your other income for the year and taxed at your marginal rate, so a large withdrawal can push part of it into a higher band. There is no National Insurance on pension income.
Why is my first drawdown payment taxed so much?
The first taxable payment usually comes out on an emergency Month 1 tax code, because your provider has no tax code from HMRC yet. That code treats the one-off payment as if you took it every month, so it over-taxes it. On this example the emergency tax is about £5,600 instead of £486, an over-charge of roughly £5,114.
How do I get the emergency tax back?
You can reclaim it. If you have emptied the pot use form P50Z, if you took a lump sum and stopped use P53Z, and for a partial withdrawal use P55. HMRC usually refunds within a few weeks, or it corrects itself through your tax code by the end of the tax year.
Is it better to take smaller withdrawals?
Often yes. Spreading withdrawals across tax years keeps more of each one inside your Personal Allowance and the basic-rate band, so less is taxed at 40%. Taking a very large sum in one year is the main way people fall into higher-rate tax by accident.
What would a worked example look like?
Withdrawing £20,000 from a £200,000 pot with no other income leaves £5,000 tax-free and £15,000 taxable. Because the taxable part sits inside the Personal Allowance and basic-rate band, the estimated tax is only £486, leaving about £19,514. The first payment may still be over-taxed under an emergency code, reclaimable from HMRC with a P55.
How can a large withdrawal push me into a higher tax band?
The taxable three-quarters of a withdrawal is added on top of any other income for the year, so a large single withdrawal can tip part of it into the 40% higher rate even where normal income is modest. Spreading a withdrawal across two or more tax years, or keeping each year within the basic-rate band, generally reduces the total tax paid.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.