You can take up to 25% of your Self-Invested Personal Pension tax-free, subject to an overall lifetime cap of £268,275 across all the pensions you hold.1GOV.UK. Tax When You Get a Pension – Whats Tax-Free The remaining 75% is taxable as income whenever you draw it. How much of your SIPP you can actually withdraw tax-free depends on the size of your pot, what you’ve already taken from other pensions, and the route you use to access the money — and the route matters, because it changes what you can still pay into a pension afterwards.
When You Can Start
The minimum age for accessing a SIPP is 55. It rises to 57 from 6 April 2028 under the Finance Act 2022, and applies to most private and workplace pensions.2HM Revenue & Customs. Pensions Tax Manual – Member Benefits – Pensions – Protected Pension Age – Basic Principles3UK Parliament. Finance Act 2022 – Section 10 Whether you’re still working is irrelevant; the age is the gate.
Withdrawing earlier triggers an unauthorised payment charge of up to 55% of the amount taken.4GOV.UK. Tax When You Get a Pension – Higher Tax on Unauthorised Payments There is no routine hardship exception.
The 25% Rule and the £268,275 Cap
Once you reach the minimum age, up to a quarter of your fund’s value can come out without income tax.1GOV.UK. Tax When You Get a Pension – Whats Tax-Free A £200,000 pot gives you £50,000 tax-free. An £80,000 pot gives you £20,000. The value is measured when you access the money, not at some earlier point.
Sitting above that percentage is a cash ceiling. The lump sum allowance limits your total tax-free cash to £268,275 across every pension you have, not per scheme.5MoneyHelper. Tax-Free Pension Lump Sum Allowances The cap only bites once your combined pension wealth passes roughly £1,073,100, because that’s the point at which 25% exceeds £268,275. Below that, the percentage is what constrains you.
If you have taken tax-free cash from other pensions in the past, those amounts already count against the £268,275. Take £100,000 tax-free from a workplace pension a decade ago, and only £168,275 of the allowance remains for your SIPP. Anything drawn above your remaining allowance is taxed as income.
Taking It in One Go or in Slices
Two routes lead to the tax-free money, and the choice has consequences beyond the payment itself.
Pension Commencement Lump Sum
A pension commencement lump sum (PCLS) delivers the whole 25% in a single tax-free payment, with the remaining 75% moving into flexi-access drawdown where it stays invested until you draw it.6HM Revenue & Customs. Pensions Tax Manual – Pension Commencement Lump Sum – Payments This suits someone with a defined use for the money — clearing a mortgage, funding a purchase — and it leaves your future pension contribution room intact, as long as you don’t start drawing the taxable portion.
Uncrystallised Funds Pension Lump Sum
An uncrystallised funds pension lump sum (UFPLS) splits every withdrawal itself: 25% of each payment is tax-free, the other 75% is taxed as income.7HM Revenue & Customs. Pensions Tax Manual – Uncrystallised Funds Pension Lump Sum You can take as many UFPLS payments as you want, in whatever amounts, spread over as many tax years as you like. Spreading the taxable portion across years is the main reason people choose it, because it keeps each year’s marginal rate down. The cost is that every UFPLS payment triggers the contribution restriction described below.
Tax on the Other 75%
The taxable three-quarters is added to your other income for the year and taxed at your marginal rate. For 2026/27 in England, Wales, and Northern Ireland the bands are:8UK Parliament. Direct Taxes – Rates and Allowances for 2026-27
- Personal allowance of £12,570, tapering once total income passes £100,000 and gone entirely at £125,140.
- Basic rate of 20% between £12,571 and £50,270.
- Higher rate of 40% between £50,271 and £125,140.
- Additional rate of 45% above £125,140.
Scotland uses its own bands, from 19% up to 48%, so a Scottish taxpayer’s calculation will look different.
A big taxable withdrawal stacks on top of your existing income. Earn £40,000 in salary and take £60,000 from your SIPP, of which £45,000 is taxable, and much of that £45,000 falls into the 40% band rather than the 20% band you might have assumed. Splitting the withdrawal across two tax years, or using a PCLS-only approach for a year, can materially change the total tax paid.
Emergency Tax on the First Payment
Your provider is unlikely to hold a current tax code for you when you first draw a taxable amount. HMRC’s default treats the payment as if it were the first of twelve identical monthly payments in the year, which usually overtaxes you.
You reclaim the overpayment using one of three forms: P55 for a partial withdrawal with no immediate plans to take more, P50Z if you’ve emptied the pension and have no other income, or P53Z if you’ve emptied it but do have other income. Refunds typically arrive within about 30 days. If you don’t file a claim, the figures square up through your Self Assessment at year end.
The Contribution Trap After You Start Drawing Income
Once you take taxable income from your SIPP through a flexible route, your annual pension contribution allowance drops from £60,000 to £10,000, permanently.9GOV.UK. Pension Schemes Rates This is the money purchase annual allowance, or MPAA, and there’s no way to reverse it.
It’s triggered by drawing taxable income from flexi-access drawdown, taking a UFPLS, or cashing in your whole pension outside the small pots rule. It is not triggered by taking only the tax-free PCLS and leaving the drawdown pot alone, or by buying a lifetime annuity.10MoneyHelper. The Money Purchase Annual Allowance for Pension Savings
If you’re still working and paying into a pension, the difference between a £60,000 and a £10,000 contribution ceiling matters. Taking a PCLS alone lets you access your tax-free cash without touching that ceiling; the moment you take taxable income, £50,000 a year of tax-relieved saving room disappears.
Small Pots Under £10,000
A SIPP worth £10,000 or less can be cashed in as a “small pot” lump sum. You still get 25% tax-free and pay income tax on the rest, but a small pot payment does not trigger the MPAA. The rule can be used on up to three separate personal pension pots of £10,000 or less, and the entire pot must be taken in a single payment. Occupational schemes are treated more generously, with no cap on the number of small pots you can cash in. The tax-free element still counts toward your £268,275 lump sum allowance.
Higher Limits Through Historical Protection
If you registered for one of HMRC’s lifetime allowance protections — Individual Protection 2016, Fixed Protection 2016, or earlier equivalents — you may be entitled to a lump sum allowance above £268,275.11HM Revenue & Customs. Check the Protected Allowances on Your Pension Savings The lifetime allowance itself was abolished from 6 April 2024, but these protections still raise your tax-free cash ceiling. You’ll need to give your protection reference numbers to your scheme administrator when you access the pension. New applications to most of these protections have closed.
Leaving Your SIPP to Someone Else
Death benefits from a SIPP are taxed by reference to your age when you die. Die before 75, and beneficiaries can take the remaining fund income-tax-free, whether as a lump sum or through drawdown, provided the lump sum sits within the lump sum and death benefit allowance of £1,073,100 and the provider is notified within two years.12GOV.UK. Tax on a Private Pension You Inherit Die at 75 or older, and beneficiaries pay income tax at their own marginal rate on whatever they draw.
That age pivot changes withdrawal strategy in later life. If you have other assets to live on, drawing those down first and leaving the SIPP intact can be the more tax-efficient path for the family as a whole.