How pension withdrawals are taxed
If you take money directly from an untouched (uncrystallised) pension pot, 25% of each withdrawal is normally tax-free, and the remaining 75% is added to your other income for the tax year and taxed at your normal Income Tax rate. This is known as UFPLS (Uncrystallised Funds Pension Lump Sum).
There's no separate pension tax rate: the taxable 75% simply stacks on top of whatever else you earn that year, from salary to the State Pension to other pension income, so a large withdrawal can push more of your income into a higher tax band than a smaller one would.
If you've already taken your tax-free cash
If you've moved a pension pot into flexi-access drawdown and already taken your 25% tax-free lump sum from it, further withdrawals from the remaining balance are fully taxable — there's no more tax-free portion left in that pot. Select “Already taken tax-free cash” in the calculator above if this applies to you.
Emergency tax on your first withdrawal
Your pension provider very likely doesn't have an up-to-date tax code for you when you make your first flexible withdrawal, so HMRC requires them to tax it on a “Month 1” emergency basis, which usually deducts far more tax than you actually owe. You can reclaim the overpayment faster using HMRC forms P55, P53Z or P50Z, or wait for it to correct automatically after the tax year ends. The figures this calculator shows are the tax you actually owe once everything is worked out — not what your provider is likely to withhold upfront.
The Lump Sum Allowance
Allowances since 6 April 2024, the total tax-free cash you can take across all your pensions over your lifetime is capped at £268,275, the Lump Sum Allowance. This replaced the old Lifetime Allowance. Most people never approach this limit, since 25% of a typical pension pot is well under it, but it matters for larger pension savings, or if you've already taken tax-free cash from other pensions.
Example pension withdrawal tax calculations
These worked examples come straight from the calculator above, so the figures match exactly what you'd see entering the same numbers yourself.
First withdrawal, no other income
£20,000 withdrawn · £0 other income
- Tax due
- £486
- You receive
- £19,514
Topping up State Pension income
£15,000 withdrawn · £12,000 other income
- Tax due
- £2,136
- You receive
- £12,864
Large withdrawal, still working
£40,000 withdrawn · £35,000 other income
- Tax due
- £8,946
- You receive
- £31,054
Already crystallised, drawdown income
£10,000 withdrawn · £12,000 other income
- Tax due
- £1,886
- You receive
- £8,114
Frequently asked questions
How much tax will I pay taking money out of my pension?
It depends on how much you withdraw and your other income. Usually, 25% of a withdrawal is tax-free (up to the £268,275 Lump Sum Allowance) and the remaining 75% is added to your other income for the year and taxed at your normal Income Tax rate. There's no special 'pension tax rate' — a large withdrawal can simply push more of your income into a higher tax band.
Is the first 25% of my pension always tax-free?
25% of each uncrystallised withdrawal is tax-free if you're using the UFPLS method (taking lump sums directly from an untouched pot). If you've already moved your pension into drawdown and taken your tax-free cash upfront, further withdrawals from the remaining 75% are fully taxable — there's no more tax-free portion left in that pot. Select which situation applies to you in the calculator above.
What is emergency tax on pension withdrawals?
When you make your first flexible withdrawal from a pension, your provider usually doesn't have a tax code for you yet, so HMRC requires them to tax it on a 'Month 1' emergency basis. This treats the withdrawal as if it were one-twelfth of your income repeated every month for a year, which typically overtaxes a one-off withdrawal significantly. You can reclaim the overpaid tax faster using HMRC forms P55, P53Z or P50Z, or it usually corrects automatically after the tax year ends. This calculator shows the tax you actually owe, not what your provider is likely to deduct upfront.
What is the Lump Sum Allowance?
It's the £268,275 lifetime cap on tax-free cash you can take across all your pensions combined, which replaced the old Lifetime Allowance from 6 April 2024. Every tax-free lump sum you take, from any pension, reduces what's left of this allowance. Most people never get close to it, since 25% of a typical pension pot is well under £268,275, but it becomes relevant for larger pension savings.
Do I pay National Insurance on my pension income?
No. Pension income, whether from a workplace pension, personal pension, or the State Pension, is never subject to National Insurance, regardless of your age. Only Income Tax can apply.
Does taking a large pension withdrawal affect my State Pension or benefits?
A large withdrawal that pushes up your taxable income for the year doesn't affect your State Pension amount, but it could affect income-related benefits or tax credits you receive, and can trigger the Money Purchase Annual Allowance (MPAA), which cuts your annual pension contribution allowance to £10,000 if you flexibly access taxable income from a defined contribution pension. This calculator doesn't check either of those; consider them separately if they might apply to you.
What's the difference between UFPLS and drawdown?
With UFPLS (Uncrystallised Funds Pension Lump Sum), each withdrawal you take is automatically 25% tax-free and 75% taxable, straight from your untouched pot. With flexi-access drawdown, you first move some or all of the pot into a 'crystallised' drawdown account, taking up to 25% of the amount moved as tax-free cash upfront, and any further withdrawals from that drawdown account are then fully taxable, since the tax-free part has already been taken. Both are common ways to access a defined contribution pension flexibly.
Methodology and assumptions
This pension withdrawal tax calculator assumes:
- A defined contribution (money purchase) pension, accessed flexibly. Defined benefit (final salary) pensions and annuities are taxed differently and aren't covered here.
- Extra Income Tax is calculated using the marginal-rate method: your total tax with the taxable portion of the withdrawal added to your other income, minus your tax on your other income alone.
- You haven't taken tax-free cash from any other pension, unless the Lump Sum Allowance warning above tells you otherwise.
- This doesn't check the Money Purchase Annual Allowance (MPAA), which flexibly accessing taxable pension income can trigger, cutting your future annual pension contribution allowance to £10,000.
- All figures are rounded to the nearest penny.
To check your pension contribution allowance, including carry forward from previous years, see the Pension Carry Forward Calculator.
Sources
Tax figures for 2026/27 are taken directly from:
- Income Tax rates and Personal Allowances (GOV.UK)
- Income Tax in Scotland (GOV.UK)
- Scottish Income Tax: rates and bands 2026 to 2027 (gov.scot)
- Rates and thresholds for employers 2026 to 2027 (GOV.UK)
- National Insurance rates and categories (GOV.UK)
- Salary sacrifice and the effects on PAYE (GOV.UK)
- Tax on your private pension contributions: Annual Allowance (GOV.UK)
- Tapered annual allowance explained 2026/27 (MoneyHelper)
- Money purchase annual allowance (MPAA) (MoneyHelper)
- National Minimum Wage and National Living Wage rates (GOV.UK)
- Maximum weekly working hours (GOV.UK)
- Personal Allowances: adjusted net income (GOV.UK)
- Child Benefit tax charge (GOV.UK)
- Child Benefit rates (GOV.UK)
- Company car benefit: the appropriate percentage, 480 Appendix 2 (GOV.UK)
Further guidance referenced on this page:
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