UK pension freedom cashing in rules (UFPLS)
Under UK pension freedoms, individuals age 55+ (57 from 2028) can cash in some or all of their uncrystallised defined contribution pension pot.
The first 25% of each withdrawal is completely tax-free. The remaining 75% is added to your other taxable income in that tax year and taxed at your marginal income tax rate (20%, 40%, or 45%).
Worked example: Cashing in a £40,000 pension pot
Cashing in a £40,000 pot provides £10,000 (25%) tax-free cash. The remaining £30,000 (75%) is added to taxable income. For an individual already earning £25,000, £25,270 of the taxable portion falls into the 20% basic rate band (£5,054 tax) and £4,730 falls into the 40% higher rate band (£1,892 tax), leaving a net payout of £33,054.
Inputs for the uk cashing in pension calculator
Pot Value & Existing Income
Enter the pot amount being cashed in and your existing salary or pension income in the same tax year.
CALCULATOR QUESTIONS
UK cashing in pension calculator questions
Does cashing in a pension trigger emergency tax in the UK?
Yes, pension providers frequently apply an emergency Month 1 tax code (1257L M1) to lump-sum withdrawals, resulting in initial over-taxation that must be reclaimed from HMRC.
Does cashing in trigger the Money Purchase Annual Allowance?
Yes, taking a taxable UFPLS payment triggers the £10,000 MPAA, restricting future tax-relieved contributions to DC pensions.