Is pension drawdown income taxable?

Yes, in full. The tax-free element was taken as the lump sum at designation, so every drawdown income payment is taxed entirely as pension income at the member’s marginal rate, collected through PAYE (PTM063300; ITEPA 2003 s.579A).

How much tax will I pay on pension drawdown?

It depends where the income lands in the bands. On the corpus figures, £15,000 drawn with no other income costs £486; £30,000 costs £6,000 at basic rate, £12,000 at higher rate, and £16,000 where it straddles the £100,000 personal-allowance taper.

Is drawdown taxed differently in Scotland?

Yes. Drawdown income is non-savings income, so Scottish residents pay on the Scottish ladder (19% to 48%). On £60,000 of other income, £30,000 of drawdown costs £13,050 in Scotland against £12,000 in the rest of the UK. Savings, dividends and the personal allowance stay UK-wide.

Why was my first drawdown payment over-taxed?

Schemes apply the 1257L emergency code on a month-1 basis to the first payment (PAYE94055), giving only one-twelfth of the allowance and each band. A £30,000 first payment loses £11,931.25 at source against a £3,486 true liability with no other income; the difference is reclaimable on P55, P53Z or P50Z.

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Tax on pension drawdown income

Once funds are designated to flexi-access drawdown, every income payment is taxable in full — the tax-free element was the lump sum taken at designation. The bands, the calendar and the first payment do the rest.

Based on HMRC’s Pensions Tax Manual (PTM063300), ITEPA 2003, ITA 2007 and HMRC’s PAYE manual (PAYE94055).

6 min read · Last reviewed 30 Jun 2026

Income from flexi-access drawdown is taxable in full. The tax-free element of the pot was taken at designation, as the pension commencement lump sum — so each later income payment carries no second 25% and is taxed entirely as pension income at the member’s marginal rate (PTM063300; ITEPA 2003 s.579A). That is the standard treatment, and the scheme collects the tax through PAYE, like an employer paying salary. Three things then set what a given year’s drawdown actually costs: where the income lands in the bands, which side of the border the member sits, and — for the first payment — the emergency code.

Fully taxable, non-savings, through PAYE

Drawdown income is non-savings income. It stacks at the bottom of the income computation (ITA 2007 s.16): it consumes the personal allowance first, fills the basic rate band (£37,700 for 2026/27), then the higher and additional bands, and pushes savings and dividend income upwards. It counts in adjusted net income too, so heavy drawdown can cross £100,000 and abate the personal allowance at £1 for every £2 (ITA 2007 s.35). None of this needs a special drawdown rule — it is ordinary pension income in the ordinary computation.

PTM063300 ; ITEPA 2003 s.579A ; ITA 2007 s.16 and s.35 (ADR-047).

What the bands do to a given withdrawal

Because the income is taxed at its marginal position, the same payment costs very different amounts on different incomes. The corpus figures (2026/27, rUK):

Tax attributable to drawdown income at four income levels · 2026/27 · rUK

£15,000 drawn, no other income: £486.00
£30,000 drawn, £20,000 other income: £6,000.00
£30,000 drawn, £60,000 other income: £12,000.00
£30,000 drawn, £90,000 other income (PA taper bites): £16,000.00

The first row is £15,000 less the £12,570 personal allowance, leaving £2,430 at 20%. The last is the £100,000 straddle: the payment lifts adjusted net income to £120,000, cuts the allowance to £2,570, and takes an effective 53.3% of the slice. The pension withdrawal tax calculator runs any combination of drawdown and other income.

The tax year does part of the computation

The bands are annual: each tax year brings a fresh £12,570 personal allowance and a fresh £37,700 basic rate band. The same total drawn across two years is therefore computed differently from one. A member with no other income drawing £30,000 in a single year pays £3,486; drawing £15,000 in each of two years pays £486 a year — £972 in total — because two personal allowances apply instead of one. That is a statement of mechanics, not a recommendation: whether and how to phase a withdrawal depends on the member’s wider circumstances and is the adviser’s call. The calculator illustrates both shapes so the figures are on the table.

Scotland: the same income, a different ladder

For a Scottish taxpayer, drawdown income is devolved non-savings income and is taxed on the Scottish ladder — starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48% — while savings, dividends and the personal allowance stay UK-wide. On the corpus case of £30,000 of drawdown income on £60,000 of other income, the slice straddles the Scottish higher and advanced rates and costs £13,050 (£15,000 at 42% plus £15,000 at 45%), against £12,000 for the same case in the rest of the UK (PTM063300-EX-05). The residence toggle in the calculator applies the right ladder.

gov.scot Scottish income tax rates and bands ; ADR-046 / ADR-047 ; ITA 2007 s.16.

The first payment: expect the emergency code

On the first drawdown income payment the scheme usually operates the 1257L emergency code on a month-1 basis (PAYE94055): one-twelfth of the personal allowance and of each band, as if the payment were one month of a far larger annual income. A £30,000 first payment suffers £11,931.25 at source against a £3,486 true liability where there is no other income — an £8,445.25 over-deduction, reclaimed on form P55 (pot not emptied), P53Z (pot emptied, other taxable income) or P50Z (pot emptied, no other income), or through year-end reconciliation. The month-1 figure is a PAYE timing artefact, never the tax actually due. The pension emergency tax calculator computes the deduction, the true liability and the applicable form; the wider withdrawal picture is in pension withdrawals: how taking money out is taxed.

HMRC PAYE94055 ; gov.uk forms P55 / P53Z / P50Z ; ADR-049.

Common questions

Is pension drawdown income taxable?: Yes, in full. The tax-free element was taken as the lump sum at designation, so every drawdown income payment is taxed entirely as pension income at the member’s marginal rate, collected through PAYE (PTM063300; ITEPA 2003 s.579A).
How much tax will I pay on pension drawdown?: It depends where the income lands in the bands. On the corpus figures, £15,000 drawn with no other income costs £486; £30,000 costs £6,000 at basic rate, £12,000 at higher rate, and £16,000 where it straddles the £100,000 personal-allowance taper.
Is drawdown taxed differently in Scotland?: Yes. Drawdown income is non-savings income, so Scottish residents pay on the Scottish ladder (19% to 48%). On £60,000 of other income, £30,000 of drawdown costs £13,050 in Scotland against £12,000 in the rest of the UK. Savings, dividends and the personal allowance stay UK-wide.
Why was my first drawdown payment over-taxed?: Schemes apply the 1257L emergency code on a month-1 basis to the first payment (PAYE94055), giving only one-twelfth of the allowance and each band. A £30,000 first payment loses £11,931.25 at source against a £3,486 true liability with no other income; the difference is reclaimable on P55, P53Z or P50Z.

Sources & grounding

Drawdown income taxable in full as pension income, PAYE via the scheme: PTM063300 (“75% is taxed as pension income in the same way as a pension paid under a registered pension scheme”); charging provision ITEPA 2003 s.579A; the 100%-taxable post-designation treatment is the standard treatment recorded as ADR-047 (the 25% was taken as PCLS at designation; OI-4).
Non-savings stacking and band limits: ITA 2007 s.16; config 2026-27.json (personalAllowance 1257000, basicRateBand 3770000, additionalRateThreshold 12514000); ADR-041 via ADR-047.
Worked band figures — £486 (£15,000 drawn, no other income: EMTAX-EX-03 annual leg), £3,486 (£30,000, no other income: EMTAX-EX-01), £6,000 / £12,000 / £16,000 (£30,000 slice on £20,000 / £60,000 / £90,000 other income: PTM063300-EX-01/02/03): Appendices C and E, docs/research/hmrc-ptm-pension-corpus.md.
Scotland: drawdown income is devolved non-savings income on the gov.scot ladder (starter 19% → top 48%), savings/dividends and the PA stay UK-wide: ADR-046 / ADR-047; worked figure £13,050 for the £30,000 slice on £60,000 other income (PTM063300-EX-05, 42%/45% straddle).
Month-1 emergency code on the first payment and the P55/P53Z/P50Z reclaim tree: HMRC PAYE94055; ADR-049 (EMTAX-EX-01: £30,000 → £11,931.25 at source vs £3,486 true liability).

For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.