Pension Tax-Free Lump Sum Calculator
Enter your total pension pot — see how much you can take as tax-free cash under the 25% rule, whether the £268,275 allowance caps you, and what remains taxable.
How it works
From age 55 (rising to 57 in 2028) you can usually take 25% of each pension pot as tax-free cash — but the total tax-free amount across ALL your pensions is capped by the Lump Sum Allowance (LSA) of £268,275. Pots up to £1,073,100 get the full 25%; larger pots hit the cap: a £1.5M pot still yields only £268,275 tax-free.
A worked example: enter a £400,000 pot and the calculator shows £100,000 of tax-free cash (25%) with £300,000 remaining taxable. The cap is nowhere near engaged, because £400,000 sits well below £1,073,100 — the pot size at which 25% equals exactly £268,275. That number is not arbitrary: £1,073,100 × 25% = £268,275, which is why every pot from that size upward yields the same maximum tax-free amount.
The remaining 75% (or everything above the tax-free part) is taxable as INCOME when withdrawn — timing matters enormously: drawing a large taxable lump in one year can push you into 40%/45% bands, while spreading withdrawals over years can keep you at 20% or within the personal allowance.
Common mistakes: assuming 25% applies without limit (a £2M pot owner expecting £500,000 tax-free actually gets £268,275); treating the taxable 75% as if it were taxed at a flat rate, when it is simply added to your income in the year of withdrawal; and forgetting the LSA is measured across ALL your pensions combined — several modest pots can together reach the cap even though each looks comfortably under it.
Who this applies to: anyone with a defined-contribution pension approaching or past the minimum access age — 55 now, rising to 57 in 2028. If you were counting on accessing a pot at 55 and were born late enough to be caught by the 2028 change, the two-year shift may matter to your plans.
What the result shows and leaves out: the calculator splits your pot into the tax-free and taxable portions under the 25% rule and the £268,275 cap. It deliberately does not estimate the income tax on the taxable part — that depends entirely on when and how you draw it and what other income you have in those years, which is exactly the timing decision the second paragraph above describes.
HONEST NOTES: the LSA replaced the Lifetime Allowance in April 2024 and Budgets can change it — figures here are the current gov.uk values. First taxable withdrawals are often over-taxed under an emergency code and must be reclaimed from HMRC. Taking taxable income also shrinks your future annual allowance to £10,000 (MPAA) — see our annual allowance calculator. This is information, not financial advice; for large pots, regulated advice pays for itself.
FAQ
How much tax-free cash can I take from my pension?
25% of the pot, capped at the £268,275 Lump Sum Allowance across all your pensions combined. A £200,000 pot gives £50,000 tax-free; £800,000 gives £200,000; anything from £1,073,100 upward gives the same maximum £268,275. You can take it all at once, or in slices (each drawdown chunk is 25% tax-free / 75% taxable — "UFPLS"), which often works out more tax-efficient.
Is taking the full 25% at once a good idea?
Not automatically. Money left inside the pension grows free of income and capital gains tax and sits outside your estate for inheritance purposes (rules changing from 2027 — check current position); cash taken out loses those shields. Taking tax-free cash in phases keeps more compounding inside. The strongest cases FOR taking it early are clearing expensive debt or a mortgage. The worst reason is leaving it in a low-interest account — inflation quietly taxes it there.
What happens to the other 75% of my pot?
It stays invested until you draw it, and every withdrawal is taxed as income in the year you take it, on top of State Pension and any other income. Common strategies: annual withdrawals sized to stay under the higher-rate threshold, buying an annuity for guaranteed income, or a mix. Beware the first withdrawal — providers usually apply an emergency "Month 1" tax code that over-deducts; you reclaim via HMRC forms P55/P53Z, typically within weeks.
How much tax-free cash does a £400,000 pot give?
£100,000 — a straight 25%, since £400,000 is far below the £1,073,100 level where the Lump Sum Allowance starts to bite. The remaining £300,000 stays in the pension and is taxed as income as and when you withdraw it. Remember the cap is measured across all your pensions together, so if you hold other pots their tax-free portions count against the same £268,275.
When can I take my pension lump sum?
Usually from age 55, rising to 57 in 2028. From that point you can normally take 25% of each pot tax-free, all at once or in slices. Being ABLE to take it and it being sensible to take it are different questions — money left inside the pension keeps growing free of income and capital gains tax, which is why many people phase their tax-free cash rather than banking it on their birthday.
Why is the cap exactly £268,275?
It is 25% of £1,073,100 — the level of the old Lifetime Allowance that the Lump Sum Allowance replaced in April 2024. The design preserved the maximum tax-free cash that existed under the previous regime: pots up to £1,073,100 still get a full quarter tax-free, and larger pots are held at the same £268,275 ceiling. Budgets can change the figure, so treat it as the current value rather than a permanent constant.
Do I have to take the whole 25% in one go?
No. You can take tax-free cash in stages — each UFPLS-style withdrawal comes out 25% tax-free and 75% taxable — which often proves more tax-efficient than a single large lump, and keeps more money compounding inside the wrapper in the meantime. The calculator shows your total tax-free entitlement; how you phase it is a separate decision, and for large pots one where regulated advice earns its fee.
Does taking my lump sum affect what I can pay in later?
The tax-free lump sum alone does not — but the moment you draw TAXABLE income flexibly (drawdown income or a UFPLS), the Money Purchase Annual Allowance cuts your future defined-contribution allowance to £10,000 a year. Anyone planning to keep working and contributing after a first withdrawal should check our annual allowance calculator before touching the taxable part of the pot.