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.
The remaining 75% (or everything above the tax-free part) is taxable as INCOME when withdrawn — timing matters enormously: drawing a large taxable lump in one year can push you into 40%/45% bands, while spreading withdrawals over years can keep you at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.
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.