Your situation
Tax code on a workplace or private pension
Your pension provider runs PAYE like an employer, and its code usually carries the tax on your State Pension too.
Your situation points to
2L
Your current code takes about £1,795.40 too little this year.
| Tax due for the year | £1,795.40 |
| Taken with 1257L | £0.00 |
| Taken with the expected code | £1,794.00 |
| Personal Allowance | £12,570 |
| State Pension for the year | £12,548 |
Estimate on employment and pension income only. HMRC sets your code from its own records; savings, property and other income can change it.
A workplace or personal pension is taxed through PAYE: the provider applies a code from HMRC to each payment, exactly as an employer would. What surprises many retired people is how low that code can be. The State Pension arrives with no tax taken off, so HMRC takes its yearly amount away from your £12,570 Personal Allowance and lets the private pension collect the tax on both (GOV.UK, tax when you get a pension). The full new State Pension pays £241.30 a week (GOV.UK), about £12,547.60 over a year at that rate, which leaves almost nothing of the allowance. With a workplace pension of £9,000 on top, the estimate gives a code of 2L on the private pension and a bill of £1,795.40 for 2026 to 2027, nearly all of it taken from the workplace pension. If you have several pensions or still work, only one source carries the State Pension deduction; the others get their own codes, often BR.
Code on a workplace pension
Expected code on the pension
2L
| State Pension for the year | £12,548 |
| Tax due for the year | £1,795.40 |
| Taken by the pension with that code | £1,794.00 |
The State Pension is paid gross; its tax is collected through the code on your other pension or job.
Rules read on HMRC’s texts by Radif Partners · Editorial policy · Method
Why the pension code absorbs the State Pension
The State Pension reaches your bank account with nothing deducted, yet it counts as taxable income in full. GOV.UK explains that HMRC usually changes the code on your wages or other pensions so that the tax is collected there. In practice the yearly State Pension figure appears as a deduction in the code calculation, next to the Personal Allowance, and the number shrinks accordingly.
The table counts each weekly State Pension amount for a whole year and a workplace pension paid monthly in England or Northern Ireland, with no other income. The last column is what the pension provider deducts over the year with the expected code: it matches the total bill because the State Pension tax rides along.
| State Pension a week | Workplace pension a year | Expected code | Tax due on both | Taken by the provider |
|---|---|---|---|---|
| £241.30 | £9,000 | 2L | £1,795.40 | £1,794.00 |
| £200 | £9,000 | 217L | £1,366.00 | £1,364.00 |
| £150 | £9,000 | 477L | £846.00 | £844.20 |
| £241.30 | £25,000 | 2L | £4,995.40 | £4,994.00 |
Two things stand out. With the full rate, the code barely moves whatever the size of the workplace pension, because the State Pension alone almost fills the allowance. With a smaller State Pension, more of the allowance survives and the code rises, so two neighbours with the same workplace pension can hold very different codes.
If the State Pension plus a protected payment or other untaxed items is larger than the allowance, the code turns into a K code: an amount is added to the pension instead of taken off. Providers cannot deduct more than half of a payment under a K code (GOV.UK).
Starting a pension: the first payments
A new pension is a new PAYE source, and the provider needs a code before it can pay you correctly. Until HMRC sends one, it may use the emergency basis, where each payment gets a single week's or month's allowance (emergency tax codes). GOV.UK also notes that you may be put on an emergency code when you start receiving the State Pension, which is normal while HMRC adjusts the figures for that year. Check in your HMRC online account that the pension and the State Pension both appear with sensible yearly amounts.
Tax each month with a code
Tax in month 1 with 1257L M1
£90.20
| Tax over 12 months | £1,082.40 |
| Average each month | £90.20 |
| With 1257L instead | £1,084.00 |
Emergency basis: every month is taxed like month 1.
Starting a pension at work is also one of the reasons GOV.UK lists for receiving a tax calculation letter after the year ends (overpayments and underpayments). Those letters are sent between June and March of the next year.
Lump sums and irregular withdrawals
A tax-free lump sum leaves your Personal Allowance untouched. Whatever you take on top of it is taxable, and the provider deducts tax before paying using the code on file. GOV.UK warns that a large withdrawal may be taxed at a higher rate and leave more to pay at the end of the year. A single payment of arrears covering earlier years can push you into a higher band too; you can ask HMRC to recalculate each year with a payment schedule from the provider.
Several pensions, or a pension and a job
Each provider and employer gets its own code. One of them carries the allowance, minus the State Pension; the rest are usually BR at 20%, or D0 at 40% if the main source already reaches the higher band. At the end of the year every provider sends a P60 showing what it deducted. If those amounts add up to more than your bill, HMRC normally asks the provider to repay the difference through your pension once the code is corrected, or sets it out in a letter after the year ends; see refunds after a wrong code.