Pension Lump Sum Tax Calculator
Calculate your 25% tax-free pension commencement lump sum and the income tax due on any taxable portion.
How Pension Lump Sum Tax Calculator works
Pension commencement lump sum (PCLS)
You can take up to 25% of your pension pot tax-free as a pension commencement lump sum (PCLS) — the "25% tax-free cash". This is taken once when you first access the pension (crystallise). The remaining 75% is taxable when withdrawn.
Taxation of the lump sum
The taxable portion of a pension lump sum is treated as income in the tax year it is received and taxed at your marginal income tax rate. Taking a large lump sum in a single year can push you into a higher tax band. Phased drawdown can reduce the tax cost.
Lump sum vs drawdown
Rather than taking a large lump sum, many retirees use drawdown — taking smaller regular withdrawals, each 25% tax-free and 75% taxable. This spreads the tax and keeps more in the pension growing tax-free for longer.
Lump sum allowance (from April 2024)
The pension lump sum allowance is £268,275. This is the maximum tax-free lump sum across all your pensions. Amounts above this are taxed as income. The lifetime allowance was abolished from April 2024.
Frequently asked questions
How much tax-free pension cash can I take?
You can take up to 25% of your pension pot tax-free (up to the lump sum allowance of £268,275 across all pensions). On a £200,000 pot, that is £50,000 tax-free.
What tax do I pay on pension withdrawals?
The taxable 75% of each withdrawal is treated as income and taxed at your marginal rate. If you have no other income, you have a £12,570 personal allowance before paying any tax.
Should I take the full 25% tax-free cash?
Not necessarily. Taking all tax-free cash at once prevents future pension growth on that money. Many advisers suggest phased drawdown, taking partial amounts over time to preserve the tax-free wrapper for longer. Seek independent financial advice.
Can I take my pension before 55?
The normal minimum pension access age is 55 (rising to 57 in April 2028). Access before this age is generally only possible due to serious ill-health, and is subject to significant tax penalties in most cases.
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This calculator provides estimates for informational purposes only. It is not a substitute for personalised pension or financial advice. Speak to a regulated financial adviser before making pension decisions.