EaseMyTax

State Pension and tax

Why the tax on your private pension went up when your State Pension started

Nobody tells you this when you claim it: the State Pension is taxable, but it is paid to you in full. The tax on it has to come from somewhere, so HMRC takes it out of your other pension or your wages. That is why the payment you were used to suddenly got smaller.

The short version

1. The DWP pays it gross

The Department for Work and Pensions pays your State Pension with no tax taken off. It does not run PAYE and cannot deduct tax.

2. But it is taxable income

The State Pension counts towards your income for tax just like a private pension or a salary. If your total income is over your Personal Allowance, tax is due.

3. So HMRC collects it elsewhere

HMRC lowers the tax-free amount in the tax code used by your private pension or employer, by the full amount of your State Pension. More of that income is then taxed.

4. You are not taxed twice

Your State Pension is still paid in full. The extra tax coming off your other income is the tax on your State Pension. The total is the same as if both were taxed separately.

A worked example (2025/26)

Margaret gets the full new State Pension of £230.25 a week, which is £11,973 a year, plus a workplace pension of £9,000 a year.

  1. Her Personal Allowance is £12,570. HMRC sets the whole State Pension against it: £12,570 − £11,973 = £597 left.
  2. Drop the last digit and her workplace pension gets tax code 59L: only £599 of it is tax-free.
  3. The other £8,401 of her workplace pension is taxed at 20%, so about £1,680 comes off it over the year.
  4. That £1,680 is the tax on her total income of £20,973. Worked out the long way: (£20,973 − £12,570) × 20% = £1,681. The same, give or take a pound: a tax code rounds the allowance up slightly in your favour.

Before her State Pension started, her workplace pension was on 1257L and no tax came off it at all. Now around £140.02 a month does. Nothing has gone wrong. It is the tax on the State Pension, collected in the only place HMRC can collect it.

The questions people ring about

“My State Pension is more than my allowance. Now I have a K code. Is that right?”

Usually, yes. If your State Pension is bigger than £12,570, the sums go negative: there is no tax-free amount left, and tax is owed on the excess State Pension too. HMRC expresses that as a K code on your other pension or job, which adds an amount to your income before tax. Check the State Pension figure on your coding notice is right (weekly amount times 52) and the rest follows.

“The State Pension is my only income. Who collects the tax?”

If it is under your Personal Allowance, nobody: there is no tax to pay. If it is over, HMRC cannot use a tax code because there is no employer or pension provider to send one to. Instead they send you a Simple Assessment letter after the end of the tax year, showing the tax due and the date to pay it. You do not need to fill in a tax return.

“Why did HMRC only take part of my State Pension into account this year?”

In the year your State Pension starts, HMRC only includes the amount you will actually receive before 5 April, not the full annual figure. Next tax year the full amount goes in, so expect your code to drop again in April. That second change catches a lot of people out.

“Can I have the tax taken off my State Pension instead?”

No. The DWP has no way to deduct tax. The only options are a tax code on another source of income, or a Simple Assessment bill if there is none.

“The figure on my coding notice does not match my DWP letter.”

HMRC gets the figure from the DWP but it is sometimes out of date, especially after the April increase. Multiply your current weekly amount by 52 and, if it is different, tell HMRC through your Personal Tax Account or by phone. A wrong figure means the wrong tax comes off, and a bill or refund later.

Work out your own figures

Enter your State Pension and your other income, and see the tax code HMRC should give you and how much of the tax coming off your other income really belongs to the State Pension.

Your figures

From your DWP letter. The full new State Pension for 2026/27 is £241.30; the full basic (old) State Pension is £184.90.

£

Your other income is from

Leave blank if the State Pension is your only income.

£

Step 1: your State Pension uses up your allowance

£241.30 a week is £12,548 a year. Your Personal Allowance is £12,570. That leaves £22 of tax-free allowance for anything else you receive.

Step 2: with no other income, there is nothing to take the tax from

Your State Pension is within your Personal Allowance, so no tax is due and HMRC will not contact you about it.

What to do

  • Check the State Pension figure on your P2 coding notice against your DWP letter times 52. That is the number that matters.
  • Use the coding notice breakdown to check the rest of the lines and the arithmetic.Break down your coding notice
  • If the figure is wrong, update it in your Personal Tax Account or ring HMRC on 0300 200 3300.Personal Tax Account (GOV.UK)
  • If you have no other income and get a Simple Assessment letter, check it against your own figures before paying.Decode a Simple Assessment letterSimple Assessment (GOV.UK)
  • If you also have a private or workplace pension, check how HMRC has split your allowance between your pensions, and what the tax taken off a lump sum really costs.Private pensions and PAYE