Answers · UK 2025/26

How is a £1,000,000 pension pot taxed if I take income drawdown?

From a £1,000,000 pension pot, you can normally take £250,000 (25%) as a tax-free lump sum -- just under the £268,275 Lump Sum Allowance cap -- leaving £750,000 to draw down as taxable income, added to your other income each year and taxed at your marginal rate.

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

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A £1,000,000 defined contribution pension pot accessed through flexi-access drawdown from normal minimum pension age (currently 55, rising to 57 from April 2028) allows a Pension Commencement Lump Sum of up to 25% tax-free -- £250,000 -- which sits just under the £268,275 Lump Sum Allowance that caps how much tax-free cash can be taken across all your pensions combined. That leaves £750,000 in the taxable portion, added to any other income you have in the tax year it is drawn and taxed at your marginal Income Tax rate. With a pot at this scale, most of any meaningful annual withdrawal will likely fall in the 40% higher-rate band or above, and combining drawdown income with other earnings above £100,000 will taper the Personal Allowance, with income above £125,140 taxed at the 45% additional rate. Because of the scale of tax at stake, people with pension pots around £1 million typically take detailed financial advice on drawdown sequencing, use of the Lump Sum and Death Benefit Allowance (currently £1,073,100) for inherited pension purposes, and whether a partial annuity purchase to secure guaranteed income makes sense alongside continued drawdown of the remainder.