Working while receiving state pension is increasingly common. Here’s how it affects your tax, National Insurance, and take home pay.
Read more: See our State Pension guide for a complete overview of this topic.
Key Rules for Working After State Pension Age
| Rule | Details |
|---|---|
| Can you work and claim state pension? | Yes — no earnings limit or restrictions |
| Do you pay income tax? | Yes — state pension is taxable income |
| Do you pay employee NI? | No — exempt after State Pension age |
| Does your employer pay NI? | Yes — employer NI still applies |
| Does working increase your state pension? | No: qualifying years stop at State Pension age (deferring is the only way) |
| Can you choose to defer instead? | Yes — see our deferral guide |
How Tax Works When You’re Working and Claiming
State pension is paid gross (no tax deducted). Instead, HMRC adjusts your employment tax code to collect tax on both your earnings and state pension through your wages.
Example: £15,000 Job + Full State Pension
| Income source | Annual amount |
|---|---|
| Employment earnings | £15,000 |
| New State Pension | £12,547.60 |
| Total income | £27,547.60 |
| Tax calculation | Amount |
|---|---|
| Personal Allowance | £12,570 |
| Taxable income | £14,977.60 |
| Income tax at 20% | £2,995.52 |
| Employee NI | £0 (exempt) |
| Total take home | £24,552.08 |
Because the full State Pension (£12,547.60) uses almost all of your £12,570 Personal Allowance, the tax code on your job would drop to something like 2L, so almost all your wages are taxed. A K code only appears if your State Pension (with any extra, such as a protected payment) is more than your Personal Allowance.
Common Tax Codes for Pensioners Working
| Situation | Likely tax code | What it means |
|---|---|---|
| Job + full new State Pension | A small L code (e.g. 2L) | The pension uses almost all your allowance; the job is taxed on nearly everything |
| State Pension above your Personal Allowance (e.g. with a protected payment) | K code | Extra tax collected from wages to cover tax on the pension |
| Multiple jobs + pension | Various | HMRC splits allowance across sources |
| Job only, deferring pension | 1257L | Standard code |
If your tax code looks wrong, contact HMRC on 0300 200 3300. Incorrect codes are common when you start claiming pension alongside employment.
The National Insurance Advantage
The biggest financial benefit of working past State Pension age is the NI exemption:
| Salary | Employee NI (under SP age) | Employee NI (over SP age) | Annual saving |
|---|---|---|---|
| £15,000 | £194 | £0 | £194 |
| £20,000 | £594 | £0 | £594 |
| £25,000 | £994 | £0 | £994 |
| £30,000 | £1,394 | £0 | £1,394 |
| £40,000 | £2,194 | £0 | £2,194 |
This NI saving applies regardless of whether you’re claiming your state pension or deferring it. It applies from when you reach State Pension age.
Your employer still pays 15% employer NI on your earnings above £5,000.
Take Home Pay Comparison: Working at 50 vs 68
On a £25,000 salary, comparing a 50-year-old employee with a 68-year-old claiming full state pension:
| Age 50 (no pension) | Age 68 (with state pension) | |
|---|---|---|
| Salary | £25,000 | £25,000 |
| State Pension | £0 | £12,547.60 |
| Total income | £25,000 | £37,547.60 |
| Income tax | £2,486 | £4,995.52 |
| Employee NI | £994 | £0 |
| Total take home | £21,520 | £32,552.08 |
The 68-year-old takes home about £11,032 more: £12,547.60 from the State Pension, minus £2,509.52 extra tax, plus £994 NI saved.
Telling Your Employer You’ve Reached State Pension Age
Your employer needs to know so payroll stops deducting your National Insurance. Show them proof of your age: your birth certificate or passport (or a certificate of age exception, CA4140, if you already have one; HMRC no longer issues them). Your employer keeps paying employer National Insurance on your earnings. Check your first payslip after that date: if National Insurance is still being taken, ask your employer to correct it, and if the tax year has ended, you can claim the overpayment back from HMRC.
If you’re self-employed, Class 2 contributions stop being treated as paid from your State Pension age, but Class 4 contributions carry on for the rest of that tax year and stop from the following 6 April.
Workplace Pensions and Employment Rights After State Pension Age
- Auto-enrolment stops. Employers only have to auto-enrol workers under State Pension age. If you’re between State Pension age and 75 you can still ask to join your employer’s scheme, and if you earn enough your employer has to pay in too.
- Tax relief continues until 75. You get tax relief on pension contributions up to age 75, within the usual limits.
- No forced retirement. The default retirement age was abolished in 2011, so an employer can’t make you retire because of your age unless it can objectively justify it. You keep the same rights as any other employee, including unfair dismissal protection, redundancy pay, holiday and the minimum wage.
Does Extra Work Increase Your State Pension?
| When you work | Does more work help your State Pension? |
|---|---|
| Before State Pension age, under 35 qualifying years | Yes: each year adds about £6.89 a week (and gets you to the 10-year minimum if you’re short) |
| Before State Pension age, 35+ qualifying years | Usually no (unless you were contracted out) |
| After State Pension age | No: no NI and no further qualifying years |
| After State Pension age, deferring | Yes, through the deferral increase (just under 5.8% a year), not your NI record |
Once you reach State Pension age, the only way working longer can increase your State Pension is by deferring it.
Self-Employment After State Pension Age
Self-employed workers past State Pension age:
| Obligation | Required? |
|---|---|
| Class 2 NI | No — exempt after SP age (and voluntary-only for everyone since April 2024) |
| Class 4 NI | No, from the 6 April after you reach State Pension age (it still applies for the rest of that tax year) |
| Income tax | Yes — same as employees |
| Self Assessment | Yes — if self-employed income requires it |
The NI savings for self-employed workers are also significant:
| Self-employed profit | Class 4 NI (under SP age) | NI (over SP age) | Saving |
|---|---|---|---|
| £30,000 | £1,046: (£30,000 − £12,570) × 6% | £0 | £1,046 |
| £50,000 | £2,246: (£50,000 − £12,570) × 6% | £0 | £2,246 |
Class 2 NI has been voluntary since April 2024: for most self-employed people with profits above the small profits threshold, it’s treated as automatically paid to protect your NI record, without you actually having to pay it. So it isn’t a compulsory pre-State-Pension-age cost, and the savings above are Class 4 only, calculated at the current 6% rate on profits between £12,570 and £50,270.
Should You Claim or Defer While Working?
| Your situation | Recommendation |
|---|---|
| Earning well under £12,570 | Claim: your earnings and pension share one Personal Allowance, so part of the pension is taxed at 20% but you keep most of it |
| Earning £12,570 to about £37,722 | Either: the pension is taxed at 20%. Deferring adds just under 5.8% a year |
| Earning about £37,722 to £50,270 | Consider deferral: some of the pension would be taxed at 40% |
| Earning £50,270+ | Consider deferral — pension would be taxed at 40% |
| Earning £100,000+ | Strongly consider deferral — pension could trigger 60% effective rate |
| Need the money | Claim — don’t defer if you need income |
See our full State Pension Deferral guide for break-even calculations.