Teachers' Pension Tax Code Explained: Why Your Pension Is Taxed So Much
Why tax comes off your Teachers' Pension, what your tax code should be once the State Pension starts (about 2L with the full rate), emergency codes, and how to check yours.
Independent guidance, not affiliated with the DfE, Teachers' Pensions or any teaching union.
Short answer
Your pension from April 2027
£8,280
A year, up from £8,000
Increase
+£280
A year, before tax
Per month
+£23.33
Before tax
Your details
Which describes you?
From your Benefit Statement or pension payslip. Use 0 if you have none.
Legacy 1997 or 2007 scheme benefits, if you have any. Use 0 if not.
It is paid without tax taken off, so the tax on it usually comes out of your Teachers' Pension. Use 0 if you don't get it yet.
How it's worked out
Deferred pensions and pensions in payment rise by September CPI, 3.5%.
Uses ONS September 2026 CPI of 3.5%. The rates are confirmed each spring by HM Treasury's Pensions Increase (Review) Order and applied from April 2027. The same order covers the Scottish and Northern Ireland teachers' schemes. Estimates only; your Benefit Statement or pension payslip is the figure that counts.
How your State Pension changes your code
Everyone gets one Personal Allowance, £12,570, frozen until April 2031. While you are working, it all sits in your salary's tax code, 1257L. In retirement your income usually comes from two places, and only one of them can take tax off:
- The State Pension is paid by the DWP gross, with no tax deducted.
- Your Teachers' Pension is paid through PAYE, so it can take tax off using a code from HMRC.
HMRC therefore takes your State Pension away from the allowance in your teachers' pension code. What is left is the allowance your Teachers' Pension can use, and everything above it is taxed at 20% (or Scottish rates if you live in Scotland). It looks as though your teachers' pension is taxed heavily, but part of what is collected is the tax on your State Pension.
A worked example
| A year | Amount |
|---|---|
| Teachers' Pension | £18,000 |
| Full new State Pension (2026/27) | £12,547.60 |
| Personal Allowance left for the Teachers' Pension | £22.40 (code about 2L) |
| Income tax on both, all collected from the Teachers' Pension | £3,596 |
| Teachers' Pension paid to you each month | £1,200 of £1,500 |
That is about 20% of the teachers' pension going in tax, although the real rate on your total income is 20% on everything above £12,570. If your State Pension is lower, or has not started yet, more of the allowance stays in your code and less tax comes off.
Emergency tax when your pension starts
When your Teachers' Pension first starts, Teachers' Pensions may not yet have a code from HMRC. It then has to use an emergency code, often 1257L applied month by month (shown as M1 or W1 on the payslip) or BR, which taxes the whole payment at 20%. The first payment or two can therefore look wrong. HMRC normally issues the right code within a few weeks, and any overpaid tax comes back through later pension payments in the same tax year, or from HMRC after it ends.
The lump sum is not part of this
Checking and fixing your code
- Look at your tax code in the HMRC app or your personal tax account on GOV.UK. It shows the code on each pension and how HMRC worked it out.
- Check the State Pension figure HMRC is using. If it is wrong, the code will be wrong.
- Look for income you no longer have, such as a salary from a job you left, or an old underpayment being collected.
- Contact HMRC to correct it. Teachers' Pensions has to use the code HMRC sends and cannot change it for you.
Frequently asked questions
Why is so much tax taken from my Teachers' Pension? +
Usually because the tax on your State Pension is being collected through it. The State Pension is paid without any tax taken off, so HMRC reduces the tax-free allowance in your Teachers' Pension tax code instead. The full new State Pension for 2026/27 is £241.30 a week, about £12,548 a year, which uses up almost all of the £12,570 Personal Allowance. On an £18,000 Teachers' Pension that means about £3,596 a year of tax, roughly £300 a month, comes out of your teachers' pension, even though part of it is tax on the State Pension.
What tax code should I have on my Teachers' Pension? +
If the Teachers' Pension is your only income, normally the standard 1257L. Once your State Pension starts, HMRC deducts it from your allowance: with the full new State Pension only about £22.40 of allowance is left, so the code becomes very small, around 2L. If you also have other income, or HMRC is collecting tax you owe from an earlier year, the code can go lower still or become a K code, which adds to your taxable pay instead of reducing it.
Why was I on an emergency tax code when my Teachers' Pension started? +
Because Teachers' Pensions did not yet have a tax code from HMRC for you. Pension payers then use an emergency code, often 1257L worked out month by month (shown as M1 or W1) or BR, which taxes everything at the basic rate. HMRC normally sends the right code within a few weeks, and any tax overpaid is refunded through your pension payments in the same tax year, or by HMRC after the year ends.
How do I check or change my tax code? +
Use the HMRC app or your personal tax account on GOV.UK, which shows the code on each pension and how it was worked out. If something is wrong, for example HMRC has the wrong State Pension amount or is counting income you no longer receive, you can update it there or call HMRC. Teachers' Pensions cannot change your code; it must use the code HMRC sends.
Is the tax-free lump sum taxed? +
No. The lump sum you take when your Teachers' Pension starts, whether the automatic lump sum from the pre-2007 arrangement or one you get by commuting pension, is paid tax-free within HMRC's lump sum allowance of £268,275. It does not go through your tax code. The monthly pension that follows is taxed as income.
Will the new Pension Tax Allowance stop tax on my Teachers' Pension? +
For most retired teachers, no. The allowance announced at the 28 October 2026 Budget, from 6 April 2027 to 5 April 2030, removes income tax for pensioners whose total income is no more than the full new State Pension, tapering away above that. A Teachers' Pension on top of the State Pension usually takes you well above that level. Our guide to whether a teachers' pension is taxable covers it in more detail.
Related guides
Is a Teachers' Pension Taxable?
What is taxed, what isn't, and the new Pension Tax Allowance.
Teachers' Pension Increase April 2027
What September 2026 CPI adds to your pension.
Your State Pension and Contracting Out
Why a teacher's State Pension forecast is often lower than expected.
Lump Sum Commutation Explained
Trading pension for a tax-free lump sum.