Tax if you carry on working and get a pension

Reaching State Pension age doesn't necessarily mean that you stop working or stop paying tax. If you continue working, or if you return to work, the amount of tax you'll pay on your employment and pension income - and how you'll pay it - will depend on the overall level of your taxable income and the type of pension income you're getting.

On this page:

If you're employed and getting just the State Pension
If you're employed and getting more than one pension (including the State Pension)
Tax when returning to employment after retirement
Working and on a low income?
More useful links

If you're employed and getting just the State Pension

The State Pension counts as taxable income but is paid to you without any tax taken off. You'll need to pay some tax on it if your total taxable income from your State Pension, your job and any other sources adds up to more than your tax-free allowances, eg Personal Allowance and any Blind Person's Allowance or other allowance you may be entitled to.

If tax is due on your State Pension we'll normally arrange for this to be deducted by your employer from your earnings through the Pay As You Earn (PAYE) tax code system. We do this by reducing your tax-free allowances by the amount of State Pension income you receive. This ensures you pay the right of amount of tax due.

You can find out more about how your State Pension appears in your employment tax code by following the links below.

If your affairs are complex - for example you have investment income above a certain level, or foreign income - we may also ask you to fill in a Self Assessment tax return.

Find out how tax codes work

Pensions, state benefits and your tax code

Introduction to Self Assessment

Do you have to pay tax in retirement?

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If you're employed and getting more than one pension (including the State Pension)

If you're employed and get a company and/or personal pension you will have several tax codes and payslips - from a combination of your employer and your pension provider/s.

If you're receiving the State Pension as well, we'll usually try to collect all of the tax due on it from just one company/pension provider by reducing your tax-free allowance as described in the previous section. If you have several personal/company pensions we normally collect the tax due on each from each pension provider separately.

Where you have more than one payslip and tax code it's important to understand and check them all. If you think a code is wrong you can ask to get it corrected. Read our guide below to find out more.

If you have more than one tax code

Why it's important to fill in your Pension Coding form

More on pensions, state benefits and your tax code

Find out more about PAYE for the employed on the Directgov website

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Tax when returning to employment after retirement

If you start a new job after retiring your employer will need to tell us so we can make sure that you're paying the right tax.

If you weren't paying tax in retirement

You'll need to start paying tax if your total income including State Pension and/or any other pension you get together with your employment earnings exceeds your tax-free allowances (eg, Personal Allowance and any Blind Person's Allowance). Once your employer tells us that you've started work we'll issue a tax code and collect the right amount of tax through PAYE. As described earlier, if tax is due on your State Pension we will account for this by reducing your tax-free allowances by the amount of State Pension you receive.

Find out more about Blind Person's Allowance

If you were already paying tax in retirement

If you were previously paying tax through PAYE because you already had a company or personal pension, read the earlier sections of this guide to understand how you'll pay tax once you start work.

If you weren't previously in PAYE and were filling in a Self Assessment tax return in order to pay tax on your State Pension (and other income) you may be able to pay all of your tax through your employment tax code instead. Your new employer may be able to advise you about this.

You can also call the Self Assessment Helpline on Tel 0845 900 0444, open from 8.00 am to 8.00 pm, every day except Christmas Day, Boxing Day and New Year's Day.

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Working and on a low income?

If you're earning a wage and receiving a pension but you've still got a low income, you may be able to claim Pension Credit.

Find out more about claiming Pension Credit on the Directgov website

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