Updated to fiscal year 2026-27
Pension Tax-Free Lump Sum Calculator
See how much of your pension you can take tax-free (25%, capped at £268,275), and the income tax you would pay on the rest if you drew it all in one year.
- Tax-free lump sum (25.0%)
- Taxable part you keep (48.1%)
- Income tax (26.9%)
Taking it all in one year, income tax would claim about 26.9% of your pot.
| Your pension pot | £200,000 |
|---|---|
| Tax-free lump sum (25%) | £50,000 |
| Taxable portion (75%) | £150,000 |
| Basic Rate | |
| £37,700 at 20% | −£7,540 |
| Higher Rate | |
| £87,440 at 40% | −£34,976 |
| Additional Rate | |
| £24,860 at 45% | −£11,187 |
| Income tax on the taxable portion | −£53,703 |
| Net from your pot | £146,297 |
Information
When you start taking money from a defined-contribution pension, you can usually take a quarter of it as a tax-free lump sum. The rest is taxed as income when you draw it. This page shows both parts, and what the taxable part would cost in income tax if you took it all in one go.
How much is tax-free? Normally 25% of the pot, up to an overall cap. That cap is the Lump Sum Allowance, £268,275, so a pot above about £1.07m stops getting a full quarter tax-free. You can take the tax-free cash from the Normal Minimum Pension Age, currently 55, rising to 57 from April 2028.
How is the other 75% taxed? As ordinary income, at your marginal rate, in whatever year you draw it. It stacks on top of any other income that year (salary, State Pension, other pensions), so the more you draw at once, the more of it is pushed into the higher (40%) or additional (45%) rate. There is no National Insurance on pension income. Enter your other income above to see the exact tax.
Why does taking it all at once cost so much? Because income tax is charged year by year. Cashing the whole taxable 75% in a single tax year piles it into the top bands, and if it takes your total income above £100,000 you also lose your personal allowance, an effective 60% marginal rate on that slice. Drawing it gradually, keeping each year's income lower, usually pays far less tax over your retirement, which the full simulator can model across the years alongside your State Pension and everything else.
Does Scotland change this? The 25% tax-free rule and the £268,275 cap are the same across the UK. But income tax on the taxable part follows the Scottish bands and rates for Scottish taxpayers. Tick "Resident in Scotland" above to apply them.
FAQ
- How much of my pension is tax-free?
Normally 25% of your defined-contribution pot, taken as a tax-free lump sum (the Pension Commencement Lump Sum), from age 55 (rising to 57 from April 2028). There is an overall cap: the Lump Sum Allowance is £268,275, so on a pot above about £1.07m the tax-free part stops at that figure rather than a full quarter. The other 75% is taxed as income when you draw it. This calculator shows both parts and flags when the cap bites.
- Is the rest of my pension taxed?
Yes. The 75% that is not the tax-free lump sum is taxed as ordinary income at your marginal rate when you draw it, on top of any other income that year. There is no National Insurance on pension income, so it is income tax only. This calculator stacks the taxable part on the other income you enter and shows the income tax band by band.
- What happens if I take it all in one go?
It is taxed brutally. Drawing the whole taxable 75% in a single tax year piles it on top of your other income, pushing most of it into the higher (40%) or additional (45%) rate, and if it takes your total income above £100,000 you also lose your personal allowance at an effective 60% marginal rate. Spreading the drawdown over several years, keeping each year's income lower, usually pays far less tax overall. The full simulator models a real drawdown across the years, alongside your State Pension and the rest of your finances.
- When can I take my tax-free lump sum?
From the Normal Minimum Pension Age, currently 55. It rises to 57 from 6 April 2028: anyone whose 55th birthday falls on or after that date must wait until 57. Taking benefits before this age is only possible in narrow circumstances (serious ill health) and otherwise triggers heavy unauthorised-payment charges.
- Do Scottish tax rates change this?
The 25% tax-free rule and the £268,275 cap are the same everywhere in the UK. But the income tax on the taxable 75% follows Scottish rates and bands for Scottish taxpayers (unlike dividends, which are UK-wide). Tick "Resident in Scotland" to apply the Scottish bands to the taxable portion.
Recent changes
-
The Normal Minimum Pension Age rises from 55 to 57. Anyone whose 55th birthday falls on or after this date must wait until 57 to take their tax-free lump sum.
-
The Lifetime Allowance was abolished. The tax-free lump sum is now capped by the Lump Sum Allowance instead, frozen at £268,275 (25% of the former £1,073,100 allowance).
Sources
- Tax when you get a pension (GOV.UK)
- Income Tax rates and Personal Allowances (HMRC)
Disclaimer
Not financial advice. Figures are computed from the legislative tables published by HMRC and assume a defined-contribution pension drawn outside any protected tax-free-cash entitlement, with the taxable portion taken in the single tax year shown. Your own drawdown, other income, and any scheme-specific protections change the outcome. Consult a qualified adviser for personal financial decisions.
