Pensions & Retirement2 min check

Pension Lump Sum Tax Calculator

Estimate the tax on a pension lump sum withdrawal — and how 'emergency tax' may grab too much initially.

Short answer

You can take 25% of your pot tax-free (capped at £268,275 in total under the Lump Sum Allowance). The remaining 75% is taxed as income at your marginal rate. HMRC's emergency tax often over-deducts on the first withdrawal — you reclaim it later.

Step 1 of 10%

Calculation method, coverage and version

Inputs used: Total lump sum you want to take, Other taxable income this tax year, How are you taking it?.
Calculation approach: The calculator applies the rules and assumptions described in “How it works” to the values you enter. Rounding can cause small differences from an official or provider calculation.
Coverage: Pensions & Retirement. UK nations, tax treatment, local rules and provider criteria can differ; check the official sources shown below before acting.
Content version: No page-specific review date is currently published. Treat the result as indicative and verify current rules independently.

Not included unless explicitly requested: personal circumstances not entered, provider discretion, future rule changes, professional fees and case-specific exceptions. Read the full calculator methodology.

How it works

Under flexi-access drawdown, the first 25% of any pot you crystallise is tax-free (capped at £268,275 across all your pensions — the Lump Sum Allowance). The remaining 75% is taxed as income at your marginal rate in the tax year you take it.

Take a big lump in one go and you can easily push yourself into the 40% (or even 45%) band. Spreading withdrawals across tax years keeps you in lower bands.

Worked example

Maria takes £100,000 from her SIPP, no other income that year:

Tax-free: £25,000
Taxable: £75,000
Tax: £12,432 (PA £12,570 free, £37,700 @ 20% = £7,540, £24,730 @ 40% = £9,892 → minus PA effect)
Net: ~£87,500

Who should use this

•Anyone over 55 thinking of taking a pension lump sum
•People considering UFPLS withdrawals
•Retirees planning multi-year withdrawal strategies

Common mistakes

×Taking a huge lump in one tax year and getting hit with 40%/45% tax
×Not realising the £268,275 Lump Sum Allowance cap on 25% tax-free across all pensions
×Forgetting to reclaim emergency tax via HMRC
×Triggering MPAA and losing future contribution headroom

Frequently asked questions

How much can I take tax-free?▾

25% of each pot, capped overall at the Lump Sum Allowance of £268,275 (without protection).

What is UFPLS?▾

Uncrystallised Funds Pension Lump Sum — each withdrawal is 25% tax-free and 75% taxable, drawn directly without setting up drawdown.

Why was I taxed at 40% on my first withdrawal?▾

HMRC's Month 1 emergency tax assumes the same withdrawal will repeat every month. Reclaim via P55, P53Z or P50Z.

Will taking a lump sum trigger MPAA?▾

Only if you take taxable income (not just the 25% tax-free element). Once triggered, your DC contribution limit drops to £10k/year.

Can I take small pensions as a lump sum?▾

Pots under £10,000 (up to 3 personal pensions, unlimited workplace) can be taken as 'small pots' — 25% tax-free, 75% taxed, but doesn't trigger MPAA.

Related calculators

Pension Drawdown Calculator →Pension Tax Relief Calculator →Income Tax Calculator →Annuity Calculator →