Amount you want to withdraw (max: pension pot)
State pension, employment, or other income
Net Withdrawal
£42,500.00
Income Tax
£7,500.00
Effective Rate
15.0%
Remaining Pot
£450,000.00
25% tax-free: Under current rules, 25% of each pension withdrawal can be taken tax-free (known as an Uncrystallised Funds Pension Lump Sum or UFPLS). The tax-free element is capped at £268,275 in total across your lifetime.
Everything you need to know about pension drawdown and tax
How much pension can I take tax-free?
You can take up to 25% of your pension pot tax-free. This applies whether you take a single lump sum (Pension Commencement Lump Sum) or make multiple withdrawals via UFPLS. The maximum tax-free amount is capped at £268,275 across all your pension schemes. If your total pension savings are below £1,073,100, the 25% rule applies in full. Above that, the cap limits your tax-free entitlement.
What is pension drawdown?
Pension drawdown (also called flexi-access drawdown) lets you take income from your pension pot while leaving the rest invested. Unlike an annuity, there is no guaranteed income for life — your pot can grow or shrink depending on investment performance and how much you withdraw. You can typically start accessing your pension from age 55 (rising to 57 from April 2028). Drawdown gives you flexibility to vary your income year by year.
How is pension income taxed?
The taxable portion of your pension withdrawal (75% under UFPLS, or 100% from a crystallised drawdown fund) is added to your other income and taxed at your marginal rate. Your pension provider will apply a tax code — often an emergency code on the first withdrawal, which may result in overpayment. The tax-free element uses your Personal Allowance and basic rate band first. If your total income (other income + taxable pension) exceeds £50,270, you will pay 40% on the excess (or Scottish rates if applicable).
What is the 25% tax-free lump sum cap?
Since the Lifetime Allowance was abolished in April 2024, the tax-free lump sum is now capped at £268,275 (which was 25% of the old £1,073,100 Lifetime Allowance). This cap applies to your total tax-free entitlement across all pension schemes. If you have valid LTA protection (e.g. Fixed Protection 2016), your cap may be higher — up to 25% of your protected amount. Any amount above the cap is taxed as income.
HMRC-Aligned: This calculator uses official 2025/26 tax rates and thresholds. Pension taxation can be complex — particularly around emergency tax codes, the Money Purchase Annual Allowance, and interactions with the State Pension. For personalised advice, consult a qualified financial adviser or pension specialist.
This calculator uses official rates and thresholds from:
Last verified: February 2026 · Tax year 2025/26. Results are indicative — consult a qualified accountant for personalised advice.
Reviewed by M. Samiuddin Quadri, ACCA — Chartered Certified Accountant at Gladstone & Co. · Updated for the 2025/26 tax year.
Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms