UK Pension 25% Tax-Free Lump Sum
Subject to the Lump Sum Allowance (LSA) of £268,275 (2026/27), 25% of the pension can be taken tax-free.
Use the 'X% of Y' calculator with 25% and your pension pot value. Cap: £268,275 (the LSA). Beyond that, lump sum is fully taxable.
Worked examples
£500,000 pot: £125,000 tax-free.
£1.2m pot: £268,275 cap (only 22.4% of total tax-free).
Sources:
HMRC Pensions
· retrieved 2026-05-15.
Frequently asked questions
Should I take all 25% at once?
Often no — UFPLS or flexi-access drawdown lets you spread the tax-free out over years, increasing efficiency. Speak to an IFA.
Has the lifetime allowance been removed?
Yes from April 2024, replaced by Lump Sum Allowance and Lump Sum and Death Benefit Allowance.