Pension Lump Sum Tax Calculator
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.