Take money from your pension and 25% is usually tax-free, but the rest is taxed as income. Enter your withdrawal and your other income for the year to see the tax-free cash, the tax due and what you keep.
Pension withdrawal · 2026/27
From age 55 (rising to 57 in 2028) you can take money from a defined-contribution pension. Normally 25% is tax-free (up to a lifetime cap of £268,275) and the remaining 75% is taxed as income at your marginal rate. The taxable part is added to your other income for the year, so it can tip you into a higher band — taking a big lump sum in one go is often more expensive than spreading withdrawals across tax years.
| Part of withdrawal | Tax treatment |
|---|---|
| First 25% | Tax-free (up to £268,275 lifetime) |
| Remaining 75% — basic band | 20% |
| Remaining 75% — higher band | 40% |
| Remaining 75% — additional band | 45% |
The first time you flexibly access a pension, providers usually apply an emergency "month 1" tax code, over-taxing the payment as if you'll take it every month. You then reclaim the overpayment from HMRC using forms P55, P53Z or P50Z, or wait for it to be corrected automatically. Model the rest of your retirement income on the pension drawdown calculator or the annuity calculator.
Normally 25% of each withdrawal is tax-free, up to a lifetime cap of £268,275. The remaining 75% is taxed as income at your marginal rate, added on top of your other income for the year.
It is added to your other income and taxed at 20%, 40% or 45% depending on the total. A large withdrawal can push you into a higher band, so spreading withdrawals across tax years usually reduces the overall tax.
The first flexible withdrawal is usually taxed on an emergency month-1 code, as if you'll take the same amount every month. You reclaim the overpayment from HMRC using form P55, P53Z or P50Z, or it is corrected automatically over time.
Yes, you can take the entire defined-contribution pot, but only 25% is tax-free and the other 75% is taxed as income in that year, often at higher rates. Taking it all at once can therefore generate a large, avoidable tax bill.
