Answers · UK 2025/26
What is the UK pension recycling rule?
The pension recycling rule blocks you from taking tax-free pension cash and immediately re-contributing it to a pension for fresh tax relief. Breaching limits triggers a 55% charge on the lump sum. Limit: £7,500 recycling triggers the rule.
Full answer
UK pension recycling rule 2025/26. Anti-avoidance: prevents endless tax-relief loops. Trigger conditions (ALL required): (1) tax-free lump sum taken; (2) pension contributions increased by 30%+ above expected; (3) increase exceeds £7,500 over 12 months; (4) cumulative tax-free cash over 12 months exceeds £7,500; (5) recycling was pre-planned. If all five trigger: lump sum treated as unauthorised payment — 40% + 15% surcharge = 55% on the lump sum. Safe: take £10k tax-free + continue normal £2k/year contributions. Dangerous: take £50k cash + immediately recontribute £30k. Separate rule: MPAA £10k after any taxable pension drawdown.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.