Pension Calculator UK — How Much Tax on Pension Withdrawals?
Calculate tax on UK pension withdrawals including 25% tax-free lump sum. Plan your pension drawdown strategy to minimize tax and maximize retirement income.
UK pension rules allow you to access your defined contribution pension from age 55 (rising to 57 in 2028). The first 25% can be taken as a tax-free lump sum with the remainder taxed as income. How you withdraw the remaining 75% significantly affects your tax bill. Taking too much in one year can push you into a higher tax bracket costing thousands in unnecessary tax. Strategic drawdown planning can save you tens of thousands over your retirement.
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Key Information
| Parameter | Details |
|---|---|
| Tax-Free Lump Sum | 25% of pension pot |
| Personal Allowance | £12570 tax-free income |
| Basic Rate (20%) | £12571 - £50270 |
| Higher Rate (40%) | £50271 - £125140 |
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Use Calculator NowFrequently Asked Questions
How much tax on £200000 pension withdrawal?
Taking the entire £200000 in one year: £50000 tax-free (25%) + £150000 taxable. Tax on £150000: £7486 (basic rate on £37700) + £39940 (higher rate on £99860) + £4434 (additional rate on £9860) = approximately £52000 in tax. By spreading withdrawals over 4-5 years you could reduce total tax to approximately £20000 saving £32000.
Should I take 25% tax-free lump sum?
Taking the full 25% immediately is not always optimal. If you do not need the cash it continues growing tax-free inside your pension. However if you plan to invest it outside your pension ISA is the best vehicle for the lump sum. Some people take the 25% to pay off their mortgage eliminating monthly payments and reducing retirement income needs.
What is pension drawdown vs annuity?
Drawdown keeps your pension invested while you withdraw income flexibly. Your pot can grow or shrink with markets and you can adjust withdrawals. An annuity converts your pot into a guaranteed income for life but you lose access to the capital and rates depend on your age and health. Most retirees now choose drawdown for flexibility but an annuity provides certainty against longevity risk.
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Last updated: 24 March 2026