Pension lump sum calculator
What taking a lump sum out of a pension costs in income tax, stacked on the rest of your income — and what the same money taken over more than one tax year would cost instead.
Calculator
The whole withdrawal, before any tax. This is what leaves the pension, not what reaches your bank account — the box below decides how much of it is tax-free.
Everything else taxed as income in the same tax year: salary, other pensions already in payment, the state pension, rental profit and taxable benefits. The taxable part of the lump sum sits on top of this, so leaving it at zero shows a much smaller bill than most readers will actually face.
Income tax rates differ in Scotland, so the same lump sum costs a different amount there. The tax-free share is UK-wide.
Rates and thresholds change every April, and the tax year a withdrawal falls in is the year it is paid — not the year it was requested.
A lump sum is a very large slice of income arriving in one year, and the schedule charges that shape harshly. Above £100,000 of total income the personal allowance is withdrawn by £1 for every £2, so a pound of the withdrawal in that stretch exposes another 50p to tax on top of itself. Splitting the same money across two tax years can avoid it entirely — the table below prices that.
The tax on your lump sum, and what the timing is worth
Taking £100,000.00 costs £26,946.00 in income tax
£25,000.00 of it is tax-free and £75,000.00 is taxed as income on top of your other £30,000.00 — so £73,054.00 reaches you. That is 35.93% of the taxable part, and 26.95% of the whole withdrawal.
Neither percentage is a tax rate. Both are the whole bill with the lump sum, less the whole bill without it, divided by an amount — so they move with your other income as well as with the withdrawal, and a withdrawal large enough to cross a threshold is charged at several rates on the way up.
Where the money goes
England or Northern Ireland income tax for 2026/27. The tax on the lump sum is the difference between two ordinary income tax calculations — one with the taxable part and one without — because the tax system never labels which pounds a bill belongs to.
| Taken out of the pension | £100,000.00 |
|---|---|
| Tax-free part (25.00% of the withdrawal) | £25,000.00 |
| Taxable part, added to your other income | £75,000.00 |
| Position | Income | Income tax |
|---|---|---|
| Without the lump sum | £30,000.00 | £3,486.00 |
| With it | £105,000.00 | £30,432.00 |
| The lump sum’s share of the bill | £26,946.00 |
This withdrawal has reached the personal allowance taper
Your total income for the year is £105,000.00, and above £100,000 the personal allowance is withdrawn by £1 for every £2 of income. This withdrawal has cost you £2,500.00 of personal allowance that you would otherwise have had — not on the lump sum, but on your ordinary income, for the whole year.
In that stretch the next pound of income costs 60.00% in income tax, which is higher than any rate printed anywhere on this page because it is a band rate times one and a half. This is the single most expensive place in the UK income tax system to take a lump sum into, and it is reached by a one-off event rather than by a salary — which is why so many people meet it once, by accident, and never again.
The table below prices the obvious response: take part of it in a later tax year instead. Whether that is available to you depends on whether you need the money now, which this page does not know and does not ask.
The same money, taken over more than one tax year
Each row takes the same £100,000.00 out of the pension in equal parts, one part in each tax year, on top of the same £30,000.00 of other income every year. The tax-free share applies to each part, so the tax-free total is unchanged and only the taxable slices move.
| Taken over | Taxable slice each year | Income tax in total | Saved against taking it all now |
|---|---|---|---|
| One tax year | £75,000.00 | £26,946.00 | — |
| 2 tax years | £37,500.00 | £21,892.00 | £5,054.00 |
| 3 tax years | £25,000.00 | £17,838.00 | £9,108.00 |
| 4 tax yearsthe largest saving of these | £18,750.00 | £15,000.00 | £11,946.00 |
| 5 tax years | £15,000.00 | £15,000.00 | £11,946.00 |
Taking it over 4 tax years instead of one saves £11,946.00 in income tax — the same money, out of the same pension, to the same person. Notice how much of that saving arrives with the first split and how little each further year adds: the effect comes from keeping a slice below a threshold, and once every slice is already below it there is nothing left to save.
Every row uses 2026/27 rules for every year, because a future year’s rates are not published and this page will not invent them. Nothing here grows, either: the money left in the pension is not projected forward and no return is assumed on it, so a real decision to wait also has an investment question attached that this page does not answer. The pension drawdown calculator models what a pot does over a term.
Your first payment will probably be taxed more than this
A first flexible withdrawal is normally taxed on a month 1 basis, because the pension provider has no tax code for you and cannot see your other income. A month 1 code gives one twelfth of the personal allowance and one twelfth of each band, and applies them to that single payment as though the same payment were going to arrive every month for the rest of the year. It usually is not.
| Taxable part of the payment | £75,000.00 |
|---|---|
| Deducted under a month 1 emergency code | £32,600.25 |
| Income tax actually due on it | £26,946.00 |
| Over-deducted, and reclaimable | £5,654.25 |
£5,654.25 more would be deducted than is due, and it comes back. This is a collection mechanic, not a tax: nothing has gone wrong and no rule has been applied to you that is not applied to everybody. You can wait for HMRC to reconcile it after the end of the tax year, or claim it sooner using the form that matches your circumstances — which one depends on whether you have emptied the pot and whether you have other income.
gov.uk explains how to reclaim tax overpaid on a pension payment, and lists which form applies. The figure above is what a month 1 code charges on this payment; a real payslip may round differently, and a provider that has been given a tax code for you will not use an emergency one at all.
Taking taxable money cuts what you can pay in from now on
| Annual allowance before flexible access | £60,000.00 |
|---|---|
| Money purchase annual allowance after it | £10,000.00 |
| The drop | £50,000.00 |
Taking taxable income flexibly from a defined contribution pension triggers the money purchase annual allowance, which caps what can go into money purchase pensions from then on — permanently, and carry forward cannot be used against it. Taking only tax-free cash does not trigger it. This matters most to somebody still working who takes a lump sum and then wants to keep contributing; the carry forward calculator explains the allowance this replaces. The figures above are the standard allowances, with no taper applied, because the taper needs statutory income measures this page does not ask for.
Six things this figure does not know
It does not apply the cash cap on tax-free lump sums
Stated again here because it is the limitation most likely to make the figure above wrong in the expensive direction. There is a limit on the total tax-free cash a person may take across all their pensions, and this software does not hold that figure or apply it — so for anybody with large pension savings, or who has taken tax-free cash before, the tax-free part shown may be too large and the tax too small. Your provider knows how much of yours is left.
It does not know whether taking the money is a good idea
Money taken out of a pension cannot be put back, it stops being invested, and — from April 2027 — most unused pension funds come into charge for inheritance tax, which changes the comparison between leaving money in a pension and taking it out in a way this page does not model at all. Nothing here weighs any of that. It answers what a withdrawal costs in income tax and stops.
Every year in the spread table uses this year’s rules
A future tax year’s rates, thresholds and allowances are not published and this page will not invent them, so each row applies 2026/27 rules to every year in it. A real decision to take part of the money later is a decision made against rules that may have moved. It also assumes your other income is the same in each of those years, which for somebody about to retire is often the least safe assumption on the page.
Nothing grows, anywhere
The money left in the pension is not projected forward, and no investment return is assumed on it. So the spread table shows a tax saving and not a total outcome: waiting a year has an investment consequence, in either direction, that this page does not price. The pension drawdown calculator models what a pot does over a term, and says plainly that a fixed-rate projection is not a forecast.
It is one withdrawal from a defined contribution pension
A defined benefit scheme’s lump sum works differently — it is usually bought by giving up pension income at a commutation rate the scheme sets, and none of that is modelled here. Nor is a small pot lump sum, a trivial commutation, an uncrystallised funds pension lump sum taken alongside other withdrawals in the same year, or the interaction with any pension already in payment beyond the other income box.
It prices income tax, and nothing else on the payslip
No National Insurance, because pension income does not bear it. No student loan repayment, no adjustment an existing tax code may be carrying, no High Income Child Benefit Charge, and no effect on means-tested benefits — a lump sum sitting in a bank account can affect entitlement even after the tax is settled. Your total income of £105,000.00 for the year is the figure several of those are worked out from.
Worked example: the same lump sum, one tax year and two
Rahul takes £100,000 out of his pension in one go and pays £26,946.00 in income tax. Taking exactly the same money over two tax years instead would cost £21,892.00 — £5,054.00 less. Nothing about the pension changes, nothing is invested differently, and no allowance is claimed. Only the tax year the money arrives in.
He has £30,000 of other income. 25.00% of the withdrawal — £25,000.00 — is tax-free, and the remaining £75,000.00 is taxed as income on top of that other income. His total for the year becomes £105,000.00, which is above £100,000, so £2,500.00 of his personal allowance is withdrawn as well — costing him tax on his ordinary income, not just on the lump sum.
Split across two tax years, each half puts £37,500.00 of taxable income on top of the same other income. Neither year reaches the taper, so the personal allowance survives in both — which is where most of the saving comes from, rather than from the band rates themselves.
| Figure | All in one tax year | Over two tax years |
|---|---|---|
| Taxable slice in each year | £75,000.00 | £37,500.00 |
| Total income in each year | £105,000.00 | £67,500.00 |
| Personal allowance lost to the taper | £2,500.00 | £0.00 |
| Income tax on the withdrawal | £26,946.00 | £21,892.00 |
It does not always work. A smaller withdrawal — £40,000 on the same other income — costs £7,946.00 taken in one year, and spreading it over two saves £1,946.00. The saving comes from keeping a slice below a threshold, so where no threshold is crossed there is nothing to save. A page that told every reader to spread every withdrawal would be wrong for most of them.
Neither figure is what Rahul’s first payslip will show. If this is his first flexible withdrawal it will most likely be taxed on a month 1 emergency code, which on the one-year figures would deduct £32,600.25 — £5,654.25 more than is due. That is a collection mechanic rather than a tax, and it comes back.
Methodology and sources
The calculation, in order
- Split the withdrawal into a tax-free part and a taxable part, at the share you chose — the maximum being the rate in the rules file.
- Add the taxable part to your other income and work out income tax on the total. This is the whole mechanism: the taxable part of a lump sum is earned income and it sits on top of everything else.
- Work out income tax on your other income alone.
- The difference between the two is what the lump sum costs. It is never a rate applied to the withdrawal, because a large slice passes through several rates on the way up.
- Repeat steps 2 to 4 with the taxable part divided equally across two, three, four and five tax years, keeping other income the same in each.
- Separately, work out what a month 1 emergency code would deduct from the payment, and subtract the tax actually due.
Above £100,000 of total income the personal allowance is withdrawn by £1 for every £2 of income. A pound of income in that stretch therefore exposes £1.50 to tax, and the rate on it is one and a half times whatever band rate applies. A lump sum is the commonest way an ordinary income lands there for a single year — and it is why splitting a withdrawal across two tax years can save far more than the difference between two band rates would suggest.
The month 1 emergency code, computed exactly
A month 1 code gives one twelfth of the personal allowance and one twelfth of each band, and applies them to a single payment. Income tax scales with its schedule: multiply the income and every threshold by twelve and the tax multiplies by twelve too. So the tax a month 1 code charges on a payment is the annual tax on twelve times that payment, divided by twelve — which means the figure comes out of the same engine as everything else on this site rather than out of a second implementation of the band walk written into a page.
Rates, thresholds and allowances
| Figure | 2025/26 | 2026/27 |
|---|---|---|
| Tax-free share of a pension lump sum | 25.00% | 25.00% |
| Personal allowance | £12,570 | £12,570 |
| Personal allowance taper starts at | £100,000 | £100,000 |
| Allowance lost per £1 of income above that | £1 for every £2 | £1 for every £2 |
| Income tax bands — England, Wales and Northern Ireland | Basic rate 20.00% from £0; Higher rate 40.00% from £37,700; Additional rate 45.00% from £125,140 | Basic rate 20.00% from £0; Higher rate 40.00% from £37,700; Additional rate 45.00% from £125,140 |
| Income tax bands — Scotland | Starter rate 19.00% from £0; Basic rate 20.00% from £2,827; Intermediate rate 21.00% from £14,921; Higher rate 42.00% from £31,092; Advanced rate 45.00% from £62,430; Top rate 48.00% from £125,140 | Starter rate 19.00% from £0; Basic rate 20.00% from £3,967; Intermediate rate 21.00% from £16,956; Higher rate 42.00% from £31,092; Advanced rate 45.00% from £62,430; Top rate 48.00% from £125,140 |
| Annual allowance | £60,000 | £60,000 |
| Money purchase annual allowance | £10,000 | £10,000 |
What this page does not model
- The cash cap on tax-free lump sums. Only the rate is modelled. The lifetime limit on tax-free cash is not held in this software at all.
- Future years’ rules. Every row of the spread table uses the selected year’s figures, and assumes other income is unchanged in each year.
- Investment growth of any kind. Money left in the pension is not projected forward, so the spread table is a tax comparison and not a total outcome.
- Defined benefit lump sums, small pot lump sums, trivial commutation, and the interaction between several withdrawals in one year.
- Inheritance tax. From 6 April 2027 most unused pension funds come into charge for inheritance tax, which changes the comparison between leaving money in a pension and taking it out. That is outside every tax year offered here and is not reflected in any figure.
- Everything else on a payslip or a benefits claim — student loan repayments, tax code adjustments, the High Income Child Benefit Charge and means-tested benefits.
Where the figures come from
- gov.uk — Tax when you get a pension
- gov.uk — Claim back tax on a pension you have paid too much on
- gov.uk — Tax on your private pension contributions: annual allowance
- gov.uk — Income tax rates and allowances: current and past
- gov.uk — Pension schemes rates and allowances
The rates and allowances in the table above were verified against gov.uk on 12 August 2026. That check covers the published figures this page computes with. It does not verify any result the page produces, and it has not yet been signed off by a person — the verification recorded in the source repository is an automated one. Check anything that matters against gov.uk, your pension provider or an adviser.
Every calculation runs in your browser. There is no application server and no database, so nothing you type is transmitted or stored. A share link is the exception: it carries your figures in the URL. More on what that means. Information, not advice.
Pension lump sum tax questions
- How much tax will I pay on a pension lump sum?
Part of it is tax-free — normally 25.00% — and the rest is taxed as income, on top of everything else you receive in the same tax year. There is no separate rate for pension lump sums: the taxable part is added to your salary, other pensions, state pension and rental profit, and the total runs through the ordinary bands. That is why the same withdrawal costs two people very different amounts, and why a calculator that taxes the lump sum in isolation cannot be right for anybody with other income.
- Is the tax-free share of a pension lump sum always available in full?
The rate is 25.00%, but there is also a cash cap on the total tax-free lump sums a person may take across all their pensions in their lifetime. This software holds the rate and not the cap, so it does not apply it — for anybody with large pension savings the real tax-free amount can be smaller than the share shown here. Your provider can tell you how much of your allowance is left, and it is worth asking before taking anything.
- Should I take a pension lump sum over two tax years?
It can cost materially less tax, and sometimes it makes no difference at all — which is why this page computes it rather than recommending it. The saving comes from keeping each slice below a threshold, particularly the point at which the personal allowance starts being withdrawn: above £100,000 of total income, every further pound also removes 50p of allowance and is charged at one and a half times the band rate. On the figures this page opens with, splitting the withdrawal across two tax years saves £5,054.00. On a withdrawal that never crosses a threshold, it saves nothing.
- Why was so much tax taken off my first pension withdrawal?
Because a first flexible withdrawal is normally taxed on a month 1 emergency code. Your provider has no tax code for you and cannot see your other income, so it applies one twelfth of the personal allowance and one twelfth of each band to the payment — as though the same payment were going to arrive every month for the rest of the year. For a one-off lump sum it almost never is, so the deduction is usually too large. It is a collection mechanic rather than a tax, and the excess comes back: either when HMRC reconciles the year, or sooner if you claim it using the form that matches your circumstances.
- Does taking a lump sum affect how much I can pay into a pension?
Taking taxable income flexibly does, permanently. It triggers the money purchase annual allowance, which caps further contributions to money purchase pensions at £10,000 a year instead of £60,000 — and carry forward cannot be used against it. Taking only tax-free cash does not trigger it. If you are still working and still contributing, this is often the largest cost of taking a lump sum and it does not show up in any tax figure.
- Do I pay National Insurance on a pension lump sum?
No. Pension income does not bear National Insurance at any age, so the taxable part of a lump sum is charged income tax only. That is the one respect in which it is treated more kindly than earnings — and it is the reason the effective rate on a large withdrawal can still be lower than the rate on the same amount of salary, even after the personal allowance taper has been through it.
- Does where I live change the tax on a lump sum?
Yes, for the taxable part. Income tax on earnings and pensions is devolved to Scotland, which has more bands and different rates, so the same withdrawal on the same other income costs a different amount there. The tax-free share is UK-wide, as is the personal allowance and its taper. The calculator above asks where you live for exactly this reason.
- Can I put the money back if I take too much?
No. A withdrawal out of a pension cannot be returned, and paying it back in is a new contribution subject to the annual allowance — which taking taxable income has just reduced. That asymmetry is why this page puts its limitations beside the figure rather than below it: the tax is the reversible part of the decision, and it is the only part this calculator prices.
- What does the calculator show on the figures it opens with?
Taking £100,000 out of a pension in England for 2026/27, with £30,000 of other income: £25,000.00 is tax-free and £75,000.00 is taxed on top of the other income, costing £26,946.00 — so £73,054.00 reaches the bank account. Total income of £105,000.00 takes £2,500.00 of personal allowance away as well. Over two tax years the same money would cost £21,892.00, and a month 1 emergency code on the single withdrawal would deduct £32,600.25.