Pension Lump Sum Tax Calculator 2026
Calculate tax on pension lump sums. Pension Commencement Lump Sum (PCLS): first 25% tax-free up to £268,275 lifetime. UFPLS: 25% tax-free, 75% taxed as income. Flexi-access drawdown explained.
Pension Lump Sum Tax Calculator
You have several options for taking money from your pension pot. The tax treatment depends on which method you choose and how much you have already taken tax-free.
Frequently Asked Questions
How much of my pension can I take tax-free?
You can take up to 25% of your pension pot tax-free, subject to a lifetime Lump Sum Allowance of £268,275 (from 6 April 2024). Once this is used, all further lump sums are fully taxable as income.
What is the difference between PCLS and UFPLS?
PCLS (Pension Commencement Lump Sum): You take all tax-free cash upfront (25% of pot, max £268,275), then the remaining 75% goes into drawdown or annuity. UFPLS: Each payment is 25% tax-free / 75% taxable — useful if you want regular smaller withdrawals.
What replaced the Lifetime Allowance?
The Lifetime Allowance was abolished from 6 April 2024. In its place, there are: Lump Sum Allowance (£268,275) for tax-free lump sums, and Lump Sum and Death Benefit Allowance (£1,073,100) for death benefits and serious ill-health.
Is my pension income taxable?
Yes — pension income (from annuity, drawdown withdrawals, or UFPLS taxable portion) is treated as earned income and taxed at your marginal rate via PAYE. The personal allowance (£12,570) applies.
What is emergency tax on pension withdrawals?
HMRC often applies emergency tax (Month 1 tax basis) to initial pension withdrawals, as the provider doesn't know your full income. This can result in over-taxation. Reclaim using forms P50Z, P53Z, or P55 depending on your situation.
Can I take all my pension as a lump sum?
Yes — for defined contribution pensions, you can take the whole pot as a lump sum (25% tax-free, 75% taxed). For large pots, this can result in a very high tax bill in one year. Consider spreading withdrawals over multiple years to use lower tax bands.
What is a small pot lump sum?
Small pots under £10,000 can be taken as a lump sum with 25% tax-free under the 'small pots' rule — up to 3 personal pensions and unlimited occupational pension small pots. This does not trigger the Money Purchase Annual Allowance.
Does taking pension income reduce my MPAA?
Yes — once you access defined contribution benefits flexibly (drawdown or UFPLS), the Money Purchase Annual Allowance (MPAA) reduces your annual contribution allowance from £60,000 to £10,000. Taking only a PCLS and using an annuity does NOT trigger the MPAA.