What income is taxable?
Updated on 6 April 2023
Pensioners
Pensioners
You do not have to pay tax on all of your income. In tax terms, some income is called taxable, which means it forms part of the total income that you have to pay tax on (though sometimes no tax may be due if the income falls within your allowances or is taxed at 0%). Other income is non taxable, not taxable, exempt or tax-free. This means you do not include the income in your total taxable income and therefore you do not have to pay tax on it. This page deals only with income that you get from pensions and related items.
What pensions income is taxable?
The following list includes pensions income that is normally taxable.
- Pension income: from occupational pensions, private pension schemes, personal pension plans or retirement annuity policies. Your pension provider takes off tax under the Pay As You Earn (PAYE) system, before paying you the pension. See: How is tax collected from my occupational and private pensions? Note, however, that if you are receiving a pension that was originally paid to someone else, such as your late spouse or civil partner, this might not be taxable. See our bereavement section for more information.
- Foreign pensions and lump sums paid under overseas pension schemes.
- Industrial death benefit (IDB): pensions payable under this scheme are taxable as pension income. IDB was abolished with effect from 11 April 1988. Pensions already in payment at that date continue to be paid.
- The new state pension can be claimed by those who reach state pension on or after 6 April 2016, who have built up enough qualifying years of NIC. It is fully taxable.
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For those who reached state pension age before 6 April 2016, the state pension can be made up of some different elements. Most of these elements are taxable, but increases for dependent children are not taxable.
- State pension lump sums: arising as a result of deferral of a pre-6 April 2016 state pension.
- Purchased life annuities: income element.
Most of these elements are taxable, but increases for dependent children are not taxable.
What pensions income is tax free?
The following list includes income that is normally tax free.
- Child dependency additions paid with state pension or other social security pensions.
- Christmas bonus for pensioners.
- Cold weather payments.
- Pension credit: there is more information on pension credit on GOV.UK. You can also use the pension credit calculator on GOV.UK to see how much pension credit you might get.
- War widow's or dependant's pension.
- Winter fuel payment.
- Gallantry awards: additional pensions or annuities paid to holders of some bravery medals are free from tax – a list can be found in the HMRC manual at EIM75920.
- German and Austrian annuities and pensions for victims of Nazi persecution.
- Certain pension commencement lump sums from UK approved pension schemes usually up to 25% of the capital value.
- Disability pensions of members of the armed forces may be tax free - see HMRC manual EIM75920.
- Certain pensions awarded to an employee because of an injury at work are free of tax. You will need to check the details with your pension payer and/or HMRC – some further HMRC information is available in their manual EIM75080.
- Purchased life annuities: capital element.
Where can I get information on whether other types of income are taxable?
For more information on various types of taxable and tax-free income, you may find these sections of our website helpful:
- Tax basics: what income is taxable?
- Self-employment: how do I work out my taxable profits?
- Employment: what income is taxable?
- Tax credits and benefits: state benefits
There is more information on the taxation of savings income and property income in our Savers, property owners and other tax issues section.
Tax guides
Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?
Am I employed, self-employed, both or neither? Working through a limited company What is the national minimum wage? How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? How is tax collected on taxable state benefits? How do I check my coding notice? Do I need to complete a tax return? What tax do I pay on redundancy payments?Employment benefits and expenses What are benefits-in-kind? What payments and benefits are non taxable? What if I incur expenses in relation to my job? What travel expenses can I claim? What if I use my own car for business purposes? Payroll giving Allowances and expenses paid to armed forces personnel and deductions from their income Pensions and employees What is automatic enrolment for employees? What National Insurance do I pay as an employee? How do I repay my student loan? What if I do not pay enough tax? What if I pay too much tax? What if I work abroad temporarily? What if I am in the armed forces and work overseas? First time workers Apprenticeships
Am I employed, self-employed, both, or neither? How do I register for tax and National Insurance? What business records should I keep? Working out profits, losses and capital allowances When do I make Self Assessment payments and file my tax return? How do I pay tax on self-employed income? What tax allowances am I entitled to? What is the trading allowance? What National Insurance do I pay if I am self-employed? What is the Construction Industry Scheme (CIS)? Tax checks for taxi, private hire and scrap metal licences How do I work out my profits for universal credit? Do I have to pay VAT if I am self-employed? What is Making Tax Digital for VAT? Pensions and self-employment How do I repay my student loan if I am self-employed? Introduction to enquiries
Pension jargon buster Approaching retirement What is income? How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? How do I check my coding notice? Tax code problems on retirement What should I do if I have not paid enough tax? What tax do I pay on savings and dividend income? How do I claim any tax back? Do I need to complete a tax return? What National Insurance do I pay after retirement? What happens if I retire abroad? What is the tax position when I take money from my pension flexibly? How do I cash in my small pension? What tax do I pay on my state pension lump sum? What is state pension deferral?
Taxes on death: overview Dealing with the deceased's own tax affairs Tax on income and gains after death Death of a spouse or civil partner Joint property on death Pension and life assurance policies on death Income from a deceased's person's estate Inheritance tax reliefs and exemptions State benefits on death Getting help with bereavement and inheritance tax Bereavement jargon buster
