Your state pension is a taxable benefit. It is subject to income tax in the same way as your income when you take your benefits or open your pot.
You are likely to pay income tax if your taxable income, including your pension and state pension, is more than your personal tax allowance. Income tax is deducted from any income above that allowance.
Shortly before you reach your state pension age. you will receive a P161 pension coding form from HMRC. It is very important that you complete and return the form, as it helps HMRC work out what income tax you should pay on your pensions.
Paying income tax due on your state pension
How you pay any income tax due on your state pension depends on whether or not the state pension is your only income.
If you are getting another pension
If you have other pension income - for example from your workplace pension scheme or personal pension - and you pay income tax on
this income, your scheme or provider will deduct any tax on your state pension from this other income. This means that you will receive your state pension tax-free.
If you are still working, it will be your employer who will deduct and pay the tax on your state pension.
If you only get a state pension
If you only get a state pension and have no other taxable income or the Income Tax due on your state pension can't be taken from other sources of taxable income, you will need to use the self-assessment method to pay your tax.
Putting off taking your state pension
If you decided to put off taking your state pension for at least 12 months and then take a lump sum (called a state pension deferral lump sum), this lump sum is subject to income tax.
If your taxable income is below your personal tax allowance when the lump sum is paid to you, you won't pay tax on the lump sum.