Tax on a £25,000 pension withdrawal — a common drawdown amount.
How much tax will you pay on a £25,000 pension withdrawal? See the full tax breakdown including basic rate and tax-free portions for 2025/26.
A £25,000 withdrawal is roughly the amount many retirees take annually to supplement the state pension and maintain a moderate standard of living. Under UFPLS rules, £6,250 is tax-free and £18,750 is taxable. If your only other income is the full state pension of about £12,000, your total taxable income is around £30,750 — still within the basic rate band. The tax bill would be approximately £3,636 (20% on the amount above your personal allowance that falls in the basic rate band), leaving you with about £21,364 net. This is close to the PLSA moderate retirement living standard of roughly £23,300 per year when combined with your state pension. If you have other income sources such as a defined benefit pension or rental income, check whether the additional £18,750 pushes you into the higher rate bracket above £50,270.