Filling the Basic Rate Band: a UK Withdrawal Schedule

Key takeaways

• The basic rate band is £37,700 wide in 2026/27 and 40% starts at £50,271. A year of unused band is worth up to £7,544.48 in deferred tax.
• The full new State Pension is £241.30 a week in 2026/27, which is £12,547.60 over 52 payments. That leaves £22.40 of the £12,570 personal allowance unused.
• Taking £30,000 in 2026/27 costs £0 from an ISA, £1,080 from a fund sold at a 30% gain, £4,495.52 as an uncrystallised pension lump sum, and £5,995.52 from crystallised drawdown.
• HMRC repaid £50,353,656.76 on 12,612 pension tax overpayment forms between 1 April and 30 June 2026, an average of £3,992.52 each.
• Scotland's 20% band ends at £29,526 and its 42% rate starts at £43,663, cutting the fillable headroom to £31,114.40 against £37,722.40 elsewhere.

Filling the basic rate band is worth £7,544.48 a year, and only if your later rate is 40%

How much can you take out of a pension this year before the tax rate jumps? In England, Wales and Northern Ireland for 2026/27, GOV.UK puts the answer at £50,270 of taxable income. Above that, the rate goes from 20% to 40%.

So here's the whole idea in one line. If you're going to need the money eventually, and you'd otherwise take it in a year when your income sits above £50,270, then every pound you take now at 20% instead of later at 40% saves 20 pence. Fill the band completely and the arithmetic runs to £7,544.48 of tax deferred in a single year, which is 20% of the £37,722.40 of headroom described below.

That number is the ceiling, not the expectation. It only exists if the alternative really is a 40% year. Plenty of people never have one, and for them filling the basic rate band deliberately buys nothing at all, while costing them tax-free growth inside the pension. The rest of this piece is about which of those two people you are, and what the schedule looks like if you're the first.

What the band actually is in 2026/27, and how much of it the State Pension eats

GOV.UK sets the personal allowance at £12,570 for the tax year from 6 April 2026 to 5 April 2027. Basic rate at 20% runs from £12,571 to £50,270, so the band itself is £37,700 wide. Higher rate at 40% runs to £125,140, and above that it's 45%. The allowance itself tapers away above £100,000, going down by £1 for every £2 of adjusted net income.

Now put a state pension into it. The Department for Work and Pensions set the full new State Pension at £241.30 a week for 2026/27, up from £230.25. Taken over 52 payments that's £12,547.60 a year, and it's taxable. It absorbs almost the entire personal allowance, leaving £22.40.

The headroom from there to the top of the band is £37,722.40. That's the number a bracket-filling schedule is aimed at: £37,700 of basic rate band plus the £22.40 of allowance the State Pension didn't quite use. Anyone with a defined benefit pension, rental income or continuing earnings has less.

The same £30,000 costs between £0 and £5,995.52 depending on which pot you open

Order of withdrawal is where the arithmetic gets interesting, because the sources are taxed on completely different bases. Take someone whose only other income is the full new State Pension, drawing £30,000 in 2026/27. Every route below stays inside the basic rate band, and every one produces a different bill.

The chart above plots that last column. Twenty percentage points separate the top row from the bottom, on identical spending, in the same tax year, by the same person. Two of those rows deserve a second look.

The savings interest row is lower than most people expect because of the starting rate for savings. GOV.UK describes it as up to £5,000 of interest with no tax on it, reduced by £1 for every £1 of other income above the personal allowance. A full State Pension of £12,547.60 sits just below the allowance, so none of the starting rate is eaten, and £6,000 of interest passes at 0% once the £1,000 personal savings allowance is added. Add a small workplace pension on top and that £5,000 band disappears pound for pound.

The capital gains row is low for a different reason: only the gain is taxed, not the withdrawal. GOV.UK sets the annual exempt amount at £3,000 for 2026/27, with 18% on gains inside the basic band and 24% above it. If you'd rather see all of these rates in one place, the UK investment tax rates table sets them out for the same tax year, and the UK dividend tax arithmetic explains why the 10.75% figure moves as other income rises.

A 15% blended rate is what makes the pension competitive with the ISA

The uncrystallised route is the one the whole schedule turns on. GOV.UK allows up to 25% of a pension to come out as a tax-free lump sum, capped at £268,275. Take a payment where a quarter is tax free and the remaining three quarters land in the 20% band, and the blended rate on the whole payment is 15%.

Run that up to the full headroom. To put £37,722.40 of taxable income into the band you'd draw £50,296.53, of which £12,574.13 arrives tax free. Tax on the taxable slice is £7,544.48, so £42,752.05 lands in your bank account and the effective rate on the lot is 15.0%.

Two constraints sit on that. The first is the lump sum allowance: at £12,574.13 of tax-free cash a year, £268,275 lasts about 21 years. The second is the ISA subscription limit, which GOV.UK sets at £20,000 for 2026/27. Of the £42,752.05 you took out, only £20,000 can go back into a sheltered wrapper this year. The other £22,752.05 sits in a taxable account, where the dividends and gains in the table above start applying to it. Asset location stops being an abstraction the moment that happens.

Scotland has no single basic rate band, and the model breaks at £43,662

The schedule above is a rest-of-UK schedule. Scottish taxpayers face six bands for 2026/27, not three. GOV.UK lists a 19% starter rate to £16,537, a 20% basic rate to £29,526, a 21% intermediate rate to £43,662, then 42% to £75,000, 45% to £125,140 and 48% above that.

So the cliff a Scottish taxpayer is filling up to isn't £50,270, it's £43,662, and the last £14,136 of it is taxed at 21% rather than 20%. Headroom above the full State Pension falls to £31,114.40, which is £6,608 less than the £37,722.40 available elsewhere in the UK. The rate saved at the margin is 21 points rather than 20, but there's less band to save it on.

The strongest objection: this takes money out of the only wrapper with no tax on it at all

The serious case against filling the basic rate band deliberately has nothing to do with the rate you pay. It's that a pension is a tax-free growth environment, and the moment money leaves it, growth is taxed again unless an ISA absorbs it.

That's a real cost and it compounds. Above the £20,000 ISA limit, dividends face 10.75% at basic rate and gains face 18% on anything above the £3,000 exempt amount, every year, for as long as the money sits there. A schedule that runs for a decade moves a lot of capital into that position. The critics of bracket filling are right that the tax saved on the way out can be given back slowly on the other side.

Pointing the other way is the change to inheritance tax. The government's measure brings most unused pension funds and pension death benefits into the value of an estate for inheritance tax, in respect of deaths on or after 6 April 2027. The costing was published on 26 November 2025. The government estimates that of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 will have a liability where previously they wouldn't, and roughly 38,500 pay more. The average inheritance tax liability rises by around £34,000 once pension assets are counted.

That doesn't settle the argument, and it isn't meant to. It changes which side of it a particular estate sits on. A pension being drawn down to fund spending is a different question from a pension being preserved to pass on, and after April 2027 those two purposes are taxed very differently.

Three ways the schedule goes wrong before the arithmetic even starts

The first is the money purchase annual allowance. GOV.UK sets the annual allowance at £60,000 for 2026/27 and the money purchase annual allowance at £10,000. GOV.UK applies the lower allowance once you flexibly access a pension, which includes taking cash from a flexi-access drawdown fund or an uncrystallised funds pension lump sum. So anyone still contributing meaningfully loses five sixths of their contribution headroom in exchange for filling the band. The pension annual allowance mechanics decide how expensive that trade is.

The second is recycling. HMRC's Pensions Tax Manual treats a tax-free lump sum as recycled when the payment, with others in the previous 12 months, exceeds £7,500, the extra contributions exceed 30% of the lump sum, and the recycling was pre-planned. The £7,500 threshold applies to events on or after 6 April 2015. HMRC also notes that very few lump sum payments are affected. The rule still sits directly across the obvious move of taking tax-free cash and paying it straight back in.

The third is the tax you pay before you pay the right tax. HMRC's PAYE manual says the scheme administrator deducts tax from a flexibly accessed payment using the emergency tax code on a week 1 or month 1 basis, or the code from a previous P45, or a code issued by HMRC. Where that takes too much, the money comes back only when the member claims it. Between 1 April and 30 June 2026, HMRC processed 10,200 P55 forms, 2,001 P53Z forms and 411 P50Z forms, repaying £50,353,656.76. That's 12,612 claims at an average of £3,992.52, in one quarter.

None of that is rare behaviour. HMRC's private pension statistics of 30 July 2026 record £22.4 billion of taxable payments withdrawn flexibly in 2025-26, up from £18.6 billion the year before. Between 1 January and 31 March 2026, 770,000 individuals took £5.9 billion across 1.9 million payments, an average of £7,700 each. The FCA counted 961,575 pension plans accessed for the first time in 2024/25, with drawdown sales rising from 278,977 in 2023/24 to 349,992.

What this arithmetic cannot tell you

Every rate here is statutory and every one is for 2026/27 only. Bands move at Budgets, and the whole calculation is a snapshot of one tax year. That's why this piece carries a date and gets rebuilt each April.

The model is also deliberately bare. It assumes one person, no defined benefit pension, no continuing earnings, no allowance taper, no protected lump sum allowance and no means-tested benefits. Real cases have at least one of those, and each of them changes the headroom figure rather than the method. It says nothing about whether the money is needed at all, which is the question that comes first.

The behavioural data has narrower limits still. HMRC's withdrawal totals and the FCA's plan counts describe what people did, not what it cost them or whether it worked. A £7,700 average withdrawal is not evidence of a good decision or a bad one, and neither statistic is a sample of outcomes. The 21-year figure for the lump sum allowance assumes a flat withdrawal and no protection, which no real schedule holds to.

And the saving itself is conditional in a way that's easy to lose. The £7,544.48 isn't a return. It's the difference between two tax rates on the same money, and it only exists if the 40% year would otherwise have happened.

What would change the conclusion

If your marginal rate later is 20% anyway, the case collapses. There's no rate arbitrage, and you've moved money from a tax-free wrapper into a taxable one for nothing. That's the single most common reason the schedule doesn't apply, and it applies to most people. The ISA vs pension comparison is the same arithmetic run from the contribution side.

If the inheritance tax measure is amended before 6 April 2027, the estate-planning argument for accelerating withdrawals weakens with it. The measure is legislated, but the estimates above are estimates, and the interaction with income tax on inherited pots is doing as much work as the headline.

If a Budget moves the £50,270 threshold or the £37,700 band, every figure on this page moves with it. The method survives; the numbers don't. Same for the Scottish bands, which have been diverging from the rest of the UK band by band.

And if a large one-off cost lands, a care fee or a roof, the smoothing was theoretical. One forced withdrawal at 40% undoes several years of careful filling. What matters through all of it is knowing where your taxable income sits against £50,270 before the tax year ends rather than after, which is a tracking problem more than a tax one.