Lump Sum Allowance Calculator United Kingdom

What the lump sum allowance calculator does

The calculator turns a pension pot and a planned withdrawal into two numbers: how much of the lump sum reaches you tax-free and how much is taxed as income. It applies the 25% tax-free fraction, caps it at the allowance you have left, taxes the rest at your marginal rates and reports what remains of both the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance.

For years savers watched the lifetime allowance, a ceiling on the total value of their pension benefits. It was abolished in April 2024. Its replacement is narrower and, for anyone with a large pot, more relevant: a cap on tax-free cash rather than on the pension itself.

How the Lump Sum Allowance works

The allowance, normally £268,275, is one running total across all your pensions. Each tax-free lump sum comes off it, and once it is used up no more tax-free cash is available from any scheme. It does not refresh each year and is not per pension.

Within it, the usual tax-free fraction still applies: a defined contribution pension typically lets you take a quarter of the amount you take benefits from as tax-free cash. For smaller pots the fraction is the limit and the allowance never comes into play; for pots above about £1,073,100 the allowance is the limit. The calculator works out both and uses the lower.

So tax-free cash is capped in pounds while pots keep growing. A pot that doubles past that point does not produce more tax-free cash, and everything above the cap comes out as taxable income.

Tax on the amount above the allowance

You are allowed to take more than your remaining allowance, and there is no special charge like the 55% lifetime allowance charge under the old rules. The excess is simply added to your taxable income for the year and taxed at your rates on top of everything else you receive.

Because it stacks on your other income, a large withdrawal can push you through more than one band in a year and reduce your personal allowance once total income passes £100,000. The calculator taxes your income with and without the lump sum and reports the difference, which captures both effects.

For example, taking £300,000 from a £1.2 million pot with no other income gives £268,275 tax-free, because 25% of the pot would be £300,000, more than the allowance. The other £31,725 is taxable: after the £12,570 personal allowance, £19,155 is taxed at 20%, £3,831 of tax.

This is the strongest argument for spreading large withdrawals across tax years. The allowance does not change, but the rate on the excess depends on how much other income falls in the same year.

The Lump Sum and Death Benefit Allowance

Above the Lump Sum Allowance sits a second, larger cap, normally £1,073,100. It covers the tax-free lump sums you take in your lifetime and certain lump sums paid to beneficiaries when you die, including serious ill-health lump sums. Every tax-free payment reduces both allowances, so lifetime withdrawals shrink what can pass on tax-free later.

For most people the smaller allowance runs out long before the larger one. The larger one matters more for people who have taken little tax-free cash and intend their pensions mainly as an inheritance. The calculator shows what is left of it so you can see the estate planning effect of a withdrawal alongside the tax effect.

Transitional protections and earlier withdrawals

If you took benefits under the old lifetime allowance rules, you do not start with the full allowance. A standard transitional calculation reduces it by reference to what you used before, and schemes issue statements showing your position. People with older forms of protection may have higher allowances, and some protected lump sum rights sit outside the normal fraction.

Enter the figure from your scheme statement in the field for allowance already used, so the result reflects your actual remaining allowance. If you hold a protection certificate, treat the standard output as indicative and work from the figures your scheme or adviser confirms.

Planning around the cap

Taking tax-free cash early uses allowance you cannot get back, so there is a cost to withdrawing cash you do not need. Splitting a large lump sum across two or more tax years lowers the rate on the taxable part without affecting the tax-free part. Leaving funds untouched keeps both allowances intact, which matters if passing wealth on is a priority. The order and timing of withdrawals change the outcome even when the total taken does not.

Reading your result

Compare the tax-free figure with the maximum available. If they are equal, the 25% fraction is the limit and the allowance has room left. If the maximum is lower, you have reached the cap and further cash will be taxed. The effective tax rate on the lump sum is the most useful single figure, because it combines the bands and any personal allowance taper.

The two remaining allowance figures show what future withdrawals will look like. Running the calculator with a different split between this year and next is the quickest way to see whether staging the withdrawal is worth it.

All figures are an estimate based on the amounts you enter and current published allowances and rates. They do not account for protected lump sum rights, scheme rules or your wider circumstances, and are not personal financial or tax advice. Check your position with your pension scheme or a qualified adviser before acting.

About This Lump Sum Allowance Calculator

Use this lump sum allowance calculator to get an instant, accurate estimate. The figures follow official GOV.UK guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.