UK employees pay tax each month with a chunk of their earnings made out to the government, but how does this differ when you become a pensioner?

Whether you’re looking forward to retirement or hoping it doesn’t come around fast, you might be wondering whether you’ll pay tax when you start to receive your State Pension.

Here’s what we know about what is taxed when you start receiving a pension.

Do pensioners pay tax?

The government website explains: “You pay tax if your total annual income adds up to more than your Personal Allowance.”

It says your total income could include the State Pension you get, an additional State Pension or a private workplace or personal pension (some of this can be taken tax-free).

Your total income can also include earnings from when you were employed or self-employed, any taxable benefits you receive or any other income which can include money from investments, property or savings.

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The government adds: “You may have to pay Income Tax at a higher rate if you take a large amount from a private pension. You may also owe extra tax at the end of the tax year.”

What is tax-free for pensioners?

The government website explains what is tax-free for pensioners: “You will not usually pay any tax if your total annual income adds up to less than your Personal Allowance.”

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It added: “You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. The most you can take is £268,275.

“If you hold a protected allowance, this may increase the amount of tax-free lump sums you can take from your pensions.

“The tax-free lump sum does not affect your Personal Allowance.

“Tax is taken off the remaining amount before you get it.”