Pensions & retirement
Pension lump sum tax calculator
Taking money out of a pension? Usually the first 25% is tax-free and the rest is taxed as income in the year you take it — stacked on top of anything else you earn. Enter what you're withdrawing to see the tax-free slice, the Income Tax on the remainder and the cash you'll actually keep for 2026/27. Worked in your browser; nothing is sent anywhere.
Your withdrawal
This covers a defined-contribution pension (a personal or workplace pot) in England, Wales or Northern Ireland. It assumes the standard 25% tax-free entitlement and no lifetime-allowance protections.
Already taken tax-free cash from another pension?
How a pension withdrawal is taxed
When you access a defined-contribution pension from age 55 (57 from 2028), a withdrawal is split in two:
- The tax-free part — usually 25%. You can normally take a quarter of what you withdraw completely tax-free. Across all your pensions this tax-free cash is capped at a Lump Sum Allowance of £268,275. It does not use up your Personal Allowance.
- The taxable part — the other 75%. This is added to your other income for the year and taxed at your marginal rate: nothing on income within your £12,570 Personal Allowance, then 20% to £50,270, 40% to £125,140 and 45% above. A big withdrawal can push you into a higher band for that year only.
- No National Insurance. Pension income doesn't attract National Insurance, so the only deduction on the taxable part is Income Tax.
Watch the "emergency tax" trap
On your first pension payment, providers often apply an emergency tax code that assumes you'll take the same amount every month — so they over-tax a one-off lump sum and you have to reclaim the difference from HMRC (forms P55, P53Z or P50Z), or it squares up at the end of the year. This calculator shows the true tax for the year — the figure you should actually end up paying once any emergency tax is refunded.
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Common questions
How much of my pension can I take tax-free?
Usually 25% of each withdrawal from a defined-contribution pension is tax-free, up to a total Lump Sum Allowance of £268,275 across all your pensions. The remaining 75% is taxed as income in the year you take it. So on a £60,000 withdrawal, £15,000 is tax-free and £45,000 is taxable.
How much tax will I pay on my pension lump sum?
It depends on the taxable 75% and your other income for the year. The taxable part is added on top of any salary, State Pension or other pension income and taxed at 20%, 40% or 45%. For example, £45,000 of taxable pension with no other income costs about £6,486 in Income Tax for 2026/27. Enter your own figures above for an exact split.
Does taking a lump sum use up my Personal Allowance?
The tax-free 25% does not — it's separate from your £12,570 Personal Allowance. The taxable 75% does count as income, so a large withdrawal can push your total income over £100,000, where the Personal Allowance is withdrawn by £1 for every £2 and an effective 60% rate applies for that year.
Why did my pension provider take so much tax?
On the first payment providers usually apply an emergency ("month 1") tax code that assumes you'll withdraw the same amount every month, which over-taxes a one-off lump sum. You reclaim the overpayment from HMRC using form P55, P53Z or P50Z, or it corrects itself at the end of the tax year. The figure here is the true annual tax once that's sorted out.
Do I pay National Insurance on pension income?
No. National Insurance is only charged on earnings from work, not on pension income, so the only deduction on the taxable part of a withdrawal is Income Tax.
Is this right for Scotland?
National Insurance rules are UK-wide, but Scottish taxpayers pay Income Tax on different bands and rates, so the tax figure here won't match. This calculator uses the England, Wales and Northern Ireland bands for 2026/27.
Pension income means a tax return
Once you're drawing a pension alongside other income, the numbers stop being simple — the taxable part stacks on your salary or State Pension, can tip you into a higher band, and often needs a Self Assessment return to settle. The paid Self Assessment Tax Estimator stacks every source of income together, applies the Personal Allowance and its £100,000 taper, and tells you the whole bill and the monthly amount to set aside — so a large withdrawal holds no nasty surprises come January.
- Self Assessment Tax Estimator 2026/27 — your complete bill across pension, salary and self-employment, with the set-aside and payment-on-account dates worked out for you.
- Freelance Day-Rate & Profit Calculator — work backwards from the take-home you need.
- Rental Property ROI & Yield Calculator — for anyone with a buy-to-let too.
- Invoice Tracker & Log — paid, outstanding and overdue, automatically.
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Get the Tax Estimator — £9 →£9 on its own, or all four tools for £19, with a 14-day money-back guarantee.