Answers · UK 2025/26

If I take £400,000 out of my pension via drawdown, how much tax will I pay?

You can take 25% (£100,000) tax-free, leaving £300,000 taxed as income when withdrawn. Spread over many years to stay in lower bands you pay far less than taking it all at once, which could push you into the 40% and 45% rates plus erode your Personal Allowance.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

With flexi-access drawdown you can normally take 25% of your pension tax-free and draw the rest as taxable income whenever you choose. Worked example on a £400,000 pot: the tax-free lump sum is £100,000, leaving £300,000 in drawdown. How much tax you pay on that £300,000 depends entirely on how fast you take it. If you withdrew the whole £300,000 in one tax year with no other income, you would use the £12,570 Personal Allowance, pay 20% on the next £37,700, 40% up to £125,140, and 45% above, and because income exceeds £100,000 your Personal Allowance would also taper away, creating a 60% effective band between £100,000 and £125,140. The bill would run well into six figures. By contrast, drawing about £50,270 a year keeps you within the basic and start of the higher band: with the Personal Allowance covering £12,570, you pay 20% on £37,700 (£7,540) on each such year, a much lower overall rate, and you can blend in tax-free cash to reduce it further. Scotland uses its own bands (19% to 48%), changing the figures. Taking large taxable sums can also trigger emergency tax codes initially, reclaimable from HMRC. Use the pension drawdown calculator to test withdrawal schedules and the income tax calculator to see the bands. For the rules on accessing pensions, see gov.uk.