UK · Pensions and tax
Pension lump sum tax calculator.
See how much of a pension withdrawal is tax-free, how much is taxed as income, and what lands in your account.
Allowance and rates verified 30 September 2026 against GOV.UK. England, Wales and Northern Ireland bands only; Scotland sets its own rates. Informational estimate, not financial or tax advice.
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Worked example
You take £40,000 in cash from your pension and have £20,000 of other income. A quarter, £10,000, is tax-free. The other £30,000 is added to your income, taking it to £50,000, which stays inside the 20% band, so the extra Income Tax is £6,000 and you receive £34,000.
If the same £40,000 sat on top of £60,000 of other income, the £30,000 would fall in the 40% band and cost £12,000 instead. The same withdrawal is taxed very differently depending on what else you earn that year.
How it works and sources
- Tax-free part: up to 25% of the amount, limited to your remaining Lump Sum Allowance of £268,275 less what you have already used.
- Taxable part: the rest of a cash withdrawal is added to your other income for the year and taxed at 20%, 40% or 45%. We calculate tax on your income with and without it and show the difference.
- Bands (2026-27, standard Personal Allowance): £12,570 at 0%, to £50,270 at 20%, to £125,140 at 40%, above that 45%. Personal Allowance falls by £1 for every £2 of income over £100,000 and is zero at £125,140.
- Lump Sum and Death Benefit Allowance: £1,073,100. It applies to serious ill-health lump sums and some death benefits, and is shown here for context only; it does not change the result.
- Not covered: emergency tax codes on a first withdrawal (you may be taxed too much up front and reclaim it), Scottish rates, protected allowances, reduced allowances for some early pension ages, and other tax on savings or dividends.
Sources, checked 30 September 2026: GOV.UK lump sum allowance GOV.UK Income Tax rates
Frequently asked questions
Is 25% of my pension always tax-free?
Usually up to 25%, but the total tax-free amount you can take across all your pensions is capped by the Lump Sum Allowance, currently £268,275. Anything above your allowances is taxed as income.
What is taxed on the other 75%?
When you withdraw cash, the taxable part counts as income for that tax year and is taxed at your marginal rates. A large withdrawal can push you into the 40% band, so spreading it over more than one tax year can cost less.
Why did my provider take more tax than this shows?
On a first withdrawal providers often apply an emergency tax code that assumes the same payment every month. This calculator shows the tax you actually owe for the year, so the difference may be reclaimable from HMRC.
Does this include Scotland?
No. Scotland sets different Income Tax bands. Use the England, Wales and Northern Ireland result only if those bands apply to you.