// Source citations for the factual claims in this guide (kept out of the // rendered tree: flow-level MDX comments break Next scroll-on-navigation). export const sources = [ "source: https://www.gov.uk/tax-on-pension/tax-free retrieved 2026-06-12: "You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum"; "The most you can take is £268,275"; the tax-free lump sum does not reduce your Personal Allowance; protected allowances can be higher.", "source: https://www.gov.uk/government/publications/increasing-normal-minimum-pension-age/increasing-normal-minimum-pension-age retrieved 2026-06-12: NMPA rises from 55 to 57 "on and after 6 April 2028"; members with a right before 4 November 2021 to take benefits at or before the existing NMPA keep a protected pension age; firefighters, police and armed forces schemes exempt.", "source: https://www.gov.uk/early-retirement-pension/personal-and-workplace-pensions retrieved 2026-06-12: taking money from a pension pot "is usually after you're 55", subject to scheme rules; ill-health early access exception.", "source: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063300 retrieved 2026-06-12: UFPLS from uncrystallised money purchase funds, "25% is not liable to tax", "75% is taxed as pension income"; can be taken as multiple lump sums over time.", "source: https://www.gov.uk/tax-codes/emergency-tax-codes retrieved 2026-06-12: "If you're on an emergency tax code your tax is worked out based on what you're paid in that week or month only."", "source: https://www.gov.uk/guidance/claim-back-tax-on-a-flexibly-accessed-pension-overpayment-p55 retrieved 2026-06-12: P55 when you have flexibly accessed but not emptied the pot and will not take further payments before the end of the tax year; P53Z when you have flexibly accessed all of your pension; P50Z when you have emptied the pension and stopped working.", ];

Guide · 4 minute read

Can I take 25% of my pension tax-free at 55?

Usually, yes. From age 55 you can normally take up to 25% of a defined contribution pension tax free, capped at £268,275 across all your pensions. The access age rises to 57 on 6 April 2028, and the other 75% is taxed as income.

The 25%, and the £268,275 cap

GOV.UK puts it plainly: you can usually take up to 25% of the amount built up in any pension as a tax-free lump sum, and the most you can take is £268,275. That cap (the lump sum allowance) covers tax-free cash from all your pensions combined, not each one separately. It only bites once your total pots pass roughly £1.07 million, so for most people the practical limit is simply 25%. A small number of people hold protected allowances from older regimes that let them take more.

Two pieces of good news hide in the rules. The tax-free lump sum does not reduce your Personal Allowance, and taking only the tax-free portion does not by itself create a tax bill. The taxable 75% is taxed as income in the year you actually draw it, which is why the order and pace of withdrawals matter so much. Our pension drawdown calculator lets you test how long a pot lasts under different withdrawal patterns.

When you can take it depends on your scheme's rules, but it is usually from 55 today. The normal minimum pension age rises from 55 to 57 on and after 6 April 2028, so if you were born in the early 1970s, check which side of the line you fall. Some people who had a right before 4 November 2021 to take benefits at 55 keep a protected pension age, and ill health can unlock access earlier.

One big lump, or 25% of every withdrawal

You do not have to take the whole 25% on day one. There are two common shapes:

• Up-front lump sum. You crystallise some or all of the pot, take 25% of that slice tax free, and move the rest into drawdown to be taxed as you withdraw it.
• Phased withdrawals (UFPLS). You take cash in chunks straight from the untouched pot. HMRC's rules say 25% of each chunk is not liable to tax and the other 75% is taxed as pension income. You can repeat this over years.

Phasing has a quiet advantage: the 75% that stays invested keeps growing, and so does the future tax-free cash attached to it. Take all your tax-free cash at 55 and the figure is frozen; any growth after that point is fully taxable when drawn. The trade-off is flexibility versus certainty, since a market fall can shrink the tax-free cash you have not yet taken. One caution on phased withdrawals: taking taxable income flexibly normally triggers the Money Purchase Annual Allowance, which sharply limits future pension contributions, so check before you draw if you plan to keep paying in.

The emergency-tax trap on your first withdrawal

The first time you take a flexible taxable withdrawal, your provider often has no up-to-date tax code for you, so HMRC's emergency code applies. Emergency codes work out tax on what you are paid in that week or month only, as if you will receive the same amount every month of the year. A one-off £20,000 taxable withdrawal can therefore be taxed as if you earn £240,000 a year, with a chunk at 40% and 45% deducted up front.

The money is not lost, but you have to wait or claim. HMRC will normally repay it through your tax code or after the year ends, or you can reclaim in-year with the right form: P55 if you took some money but did not empty the pot and will not take more before the end of the tax year, P53Z if you emptied the pension, and P50Z if you emptied it and have stopped working. A practical dodge is to take a small first withdrawal (say £100) to force a real tax code onto the provider's system before the withdrawal you actually care about.

Why taking it early costs growth

Money taken out of a pension at 55 stops compounding inside it. £50,000 left invested and growing at 5% a year is roughly £81,000 a decade later; taken at 55 and parked in cash at lower rates, it falls well short of that. There are good reasons to take tax-free cash early (clearing an expensive mortgage, for instance), but "because I can" is not one of them. If retirement is still some years off, the better lever is usually the contribution side, which you can test with the pension contributions calculator, and your wider income picture with the take-home pay calculator.

Common questions

When does the pension access age rise from 55 to 57?

On and after 6 April 2028. Some people who had a right before 4 November 2021 to take their pension at 55 keep a protected pension age, and members of the firefighters, police and armed forces schemes are exempt from the increase.

Do I have to take all my tax-free cash at once?

No. You can take one up-front lump sum, or take cash in chunks (UFPLS) where 25% of each withdrawal is tax free and 75% is taxed as income. Phasing lets the untouched part of the pot, and its future tax-free cash, keep growing.

How do I claim back emergency tax on a pension withdrawal?

Use HMRC form P55 if you withdrew part of the pot and will not take more this tax year, P53Z if you emptied the pension, or P50Z if you emptied it and stopped working. Otherwise HMRC repays the overpayment through your tax code or after the year ends.

Does the 25% tax-free lump sum count as income?

No. It is not taxed and GOV.UK confirms it does not reduce your Personal Allowance. Only the remaining 75% is taxed as income, in the year you actually withdraw it.

What is the maximum tax-free lump sum I can take from my pension?

£268,275 across all your pensions, known as the lump sum allowance. Because that is 25% of about £1.07 million, the cap only matters for large pots; most people are limited by the 25% itself. Holders of protected allowances may take more.

Guidance and education, not regulated financial advice.