Pension Lump Sum Tax Calculator for 2026/27

Use the calculator above to estimate the tax on your withdrawal

Enter the size of your pension pot, how much you want to take out, and your other taxable income for the year. The tool splits your withdrawal into the tax-free portion and the taxable portion, then applies the 2026/27 income tax bands so you can see a realistic net figure before you commit.

Taking money from your pension

Once you reach the normal minimum pension age - currently 55, moving to 57 from 6 April 2028 - you can usually start taking money from a defined contribution pension (a personal pension, SIPP or workplace money-purchase scheme). You don't have to take it all at once, and you don't have to stop working. But the way you take it changes the tax.

There are broadly three ways to draw a lump sum. You can take your whole pot in one go. You can take a single tax-free lump sum and leave the rest invested. Or you can take a series of part-withdrawals where each one is partly tax-free and partly taxed. The maths behind each is the same: a tax-free slice, then income tax on whatever is left. Seeing a chunk of a hard-saved pot disappear to tax is unsettling, so it pays to work out the figure before the money lands, not after.

This page is about one-off lump sums. If you're planning to draw a regular income year after year, that's a different decision - our pension drawdown calculator handles ongoing withdrawals, and the rules on how much you can pay in are covered by the pension annual allowance calculator.

The 25% tax-free lump sum

The headline rule most people know: you can normally take 25% of your pension pot tax-free. In the jargon this is the Pension Commencement Lump Sum (PCLS), or simply your tax-free cash. The other 75% is taxable when you draw it.

There's an overall cap. The tax-free amount is limited by the Lump Sum Allowance, set at £268,275 across all your pensions. For most savers that ceiling never bites - you'd need a pot of more than £1,073,100 to be affected by it - but it matters if you have very large or multiple pensions.

How you take the tax-free cash matters. If you take a single “front-loaded” tax-free lump sum, you get up to 25% of the pot with no tax, and future withdrawals from the rest are fully taxable. If instead you take smaller chunks (sometimes called UFPLS), each withdrawal is 25% tax-free and 75% taxable. Same total tax-free entitlement - different timing.

How the taxable part is taxed

The taxable 75% is treated as ordinary income for the year. It stacks on top of your salary, self-employment profit, rental income, the State Pension and anything else taxable, and is then taxed using the income tax bands. There's no separate “pension tax rate” - it's the same rates that apply to a wage.

The plain-English formula the pension lump sum tax calculator uses is:

• Tax-free part = lump sum × 25%
• Taxable part = lump sum × 75%
• Income tax = the taxable part stacked on top of your other income, taxed across the bands
• Net lump sum = lump sum − income tax

For England, Wales and Northern Ireland in 2026/27, the first £12,570 of total income is covered by the Personal Allowance (0%), the next slice up to £50,270 is taxed at 20%, income from £50,270 to £125,140 at 40%, and anything above £125,140 at 45%. Because the taxable part of a big lump sum lands on top of your existing income, it can easily push you into the 40% band even if your normal earnings sit in the basic-rate band. That's the part that catches people out.

One more trap at the top end: if your total income for the year tops £100,000, your Personal Allowance is reduced by £1 for every £2 above that, vanishing entirely at £125,140. A large taxable lump sum can trigger that taper, so the effective tax rate on part of it can be far higher than the headline 40%.

Scotland is different

If you're a Scottish taxpayer, your non-savings income - which includes the taxable part of a pension lump sum - is taxed using Scotland's own bands and rates, not the rates above. Scotland has more bands (starter, basic, intermediate, higher, advanced and top) and the higher-rate rates kick in at a lower income level than in the rest of the UK. The 25% tax-free entitlement and the £12,570 Personal Allowance are UK-wide and unchanged, but the tax on the remaining 75% will differ. Always check your residency before relying on a single figure; our Scotland tax calculator shows the Scottish bands in full.

Emergency tax on lump sums

Here's the surprise that lands in a lot of inboxes. When you take your first flexible pension payment, the provider often doesn't have a normal tax code for you, so HMRC tells them to use an emergency code on a “month 1” basis. That means the system pretends you'll receive that same payment every month for a year and taxes it accordingly - so a one-off withdrawal can be taxed as if it were twelve times larger.

The practical result: you can be overtaxed by hundreds or even thousands of pounds on the first payment. The good news is it's reclaimable. You can claim it back during the tax year using form P55 (if you've only taken part of your pot), P53Z (if you've emptied a pot and are still working or claiming benefits) or P50Z (if you've emptied a pot and have no other income). If you don't claim, HMRC reconciles it after the tax year ends and refunds the difference - just more slowly. Our emergency tax calculator shows how the month 1 basis inflates the deduction.

How the calculator works

The tool follows the same order HMRC does. First it takes 25% of your withdrawal as tax-free cash (subject to the Lump Sum Allowance). Then it adds the remaining 75% to the other income you've entered, applies your Personal Allowance, and runs the total through the 2026/27 bands to find the income tax. Subtract that tax from the gross lump sum and you have your net figure.

It gives you the “correct” annual tax position - the figure you should end up paying once the year is reconciled. It does not try to predict the emergency-tax deduction your provider might apply on day one, because that depends on your tax code and the timing of the payment. Treat the result as your true tax bill, and treat any extra taken at source as a refund waiting to be claimed.

Worked example: Priya takes a £40,000 lump sum

Priya is 60, lives in England and earns £35,000 a year from her job. She wants to take a £40,000 one-off lump sum from her SIPP to clear her mortgage.

• Tax-free part: £40,000 × 25% = £10,000 - no tax.
• Taxable part: £40,000 × 75% = £30,000.
• Her total income for the year becomes £35,000 + £30,000 = £65,000.

Now stack the taxable £30,000 on top of her £35,000 salary. Her salary already uses up her £12,570 Personal Allowance and fills the 20% band up to £50,270. So of the £30,000 taxable lump sum:

• The slice from £35,000 to £50,270 - that's £15,270 - is taxed at 20% = £3,054.
• The remaining £14,730 falls into the 40% band = £5,892.

Income tax on the lump sum: £3,054 + £5,892 = £8,946. Priya keeps £40,000 − £8,946 = £31,054. Note how nearly half the taxable part was dragged into 40% simply because the lump sum pushed her over £50,270 - even though her day job sits comfortably in the basic-rate band.

Worked example: spreading it over two tax years

Take the same Priya, but suppose she only needs the cash next spring and is in no rush. If she takes £20,000 before 5 April and £20,000 just after 6 April, each year's taxable part is £15,000 (75% of £20,000). Added to her £35,000 salary, that's £50,000 of total income in each year - right at the edge of the 40% band rather than well into it.

In each year the £15,000 taxable slice fits almost entirely in the 20% band (£35,000 to £50,000 is below the £50,270 threshold), so the tax is roughly £15,000 × 20% = £3,000 a year, about £6,000 across both years - against £8,946 if taken in one hit. Splitting the withdrawal saved her close to £3,000 in tax. The figures here use the 2026/27 thresholds and assume those thresholds also apply in the following year for illustration; real second-year bands could differ.

2026/27 income tax rates and thresholds

These are the rates that apply to the taxable part of a pension lump sum in England, Wales and Northern Ireland.

The Personal Allowance is reduced by £1 for every £2 of income over £100,000 and is gone entirely at £125,140. Scotland sets its own bands and rates for this kind of income. Source: gov.uk - Tax when you get a pension, checked for the 2026/27 tax year.

Reducing the tax on your lump sum

You can't avoid tax on the taxable 75%, but you can often reduce it with a bit of planning:

• Spread withdrawals across tax years. As Priya's second example shows, keeping each year's total income under £50,270 keeps the whole withdrawal in the 20% band instead of dragging part of it into 40%.
• Take only the tax-free cash now. If you mainly need a chunk of cash, taking the 25% tax-free portion and leaving the taxable 75% invested means no income tax this year. You can draw the rest later, in years when your other income is lower.
• Mind the £100,000 cliff. If a lump sum would push your total income over £100,000, you start losing your Personal Allowance - an effective 60% marginal rate on that slice. Keeping under £100,000 can be worth far more than it looks.
• Watch the timing around retirement. Drawing in a year when you've stopped or reduced work, so you have little other income, lets more of the taxable part fall in the lower bands.
• Remember the MPAA. Once you flexibly access taxable pension money, the amount you can keep paying into pensions drops to the Money Purchase Annual Allowance. If you still want to contribute, check the pension tax relief calculator before you draw.

Common mistakes and what to watch

• Assuming the whole lump sum is tax-free. Only the first 25% is. The remaining 75% is fully taxable income, and on a large withdrawal that can mean a five-figure tax bill.
• Forgetting the lump sum stacks on your other income. A £30,000 taxable slice on top of a £35,000 salary is taxed at your top rates, not from scratch - so it commonly straddles the 20% and 40% bands.
• Panicking at the emergency tax deduction. The first payment is often over-taxed under the month 1 emergency code. It's reclaimable with form P55, P53Z or P50Z - don't assume it's lost.
• Ignoring Scotland's bands. Scottish taxpayers face different rates on the taxable part. Using rest-of-UK figures will give the wrong answer.
• Triggering the £100,000 Personal Allowance taper. A big lump sum can quietly cost you your allowance and create a 60% effective rate on part of the money.
• Overlooking the State Pension. If you're already drawing the State Pension, it counts as income too and uses up part of your bands before the lump sum is taxed.

To see exactly how the taxable part lands across the bands alongside your wages, run the numbers through our income tax calculator.

These results are estimates for guidance only and are not personal tax or financial advice. Pension decisions are often irreversible - consider speaking to a regulated adviser or the free Pension Wise service before you act.

Who should use this calculator

When you take money from a defined-contribution pension, 25% is normally tax-free and the remaining 75% is taxed as income in the year you take it. This shows the split and the resulting tax, which is the calculation people most often get wrong when planning a large withdrawal.

The trap is that the taxable portion is added to your other income for the year. A large lump sum can therefore push you into a higher band — or above £100,000, where the Personal Allowance tapers and creates an effective 60% rate. Spreading withdrawals across tax years frequently saves thousands.

What this calculator assumes

• 25% of the amount taken is tax-free, with the balance taxed as income.
• The taxable portion is added to your other income for the year and taxed at the resulting bands.
• You are aged 55 or over, rising to 57 from 2028.
• The pension is defined-contribution.
• Scottish taxpayers are taxed on the withdrawal under Scotland’s own bands.

Limitations — what it does not cover

• Emergency tax on the first withdrawal. Providers commonly apply a month-1 code, deducting far more than due — reclaimable, but it can take weeks.
• The Money Purchase Annual Allowance, which drops sharply once you flexibly access a pension and severely limits future contributions.
• The lump sum allowance capping total tax-free cash across all pensions.
• Defined-benefit schemes, where tax-free cash is calculated differently.
• Whether taking it at all is wise — money left invested continues to grow outside your estate.
• Effects on means-tested benefits, since a lump sum counts as capital.

Related calculators

If you're planning your retirement income, these tools work well alongside this one: the pension drawdown calculator for ongoing withdrawals, the pension annual allowance calculator for how much you can still pay in, and the emergency tax calculator to see how the first payment might be over-taxed.