The tax you pay on pension withdrawals should be simple, in theory at least. When taking a withdrawal from a money purchase (defined contribution) pension, in most cases you can take 25% of the pension pot tax-free and the balance is then subject to income tax. The tax-free cash you take from your pension pot doesn’t use up any of your income tax personal allowance, which is a standard rate of £11,850 in the 2018/19 tax year. The amount of income tax you pay on the taxable part of the pension withdrawal depends on how much other taxable income you receive in a tax year. Despite this relative simplicity, in practical terms pension withdrawals can result in overpayments of income tax. In fact, new figures from HM Revenue & Customs (HMRC) show than more than £280m of income tax has been overpaid since the start of ‘pension freedoms’ in April 2015.