Diploma for Financial Advisers
Diploma in Accounting
Member of London Institute of Banking and Finance

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Many people wonder, can I take 25% of my pension tax-free every year? The short answer is no. You can take up to 25% of your pension pot tax-free, but this amount is usually a one-time allowance when you start withdrawing from your pension. Once you’ve taken this lump sum, any further withdrawals will be taxed as income.

When you reach the age where you can access your pension (currently 55, rising to 57 in 2028), you have options. You could:

• Take the full 25% tax-free in one go.
• Withdraw smaller amounts, where 25% of each withdrawal is tax-free (this is called flexi-access drawdown).

However, this doesn’t mean you can repeatedly withdraw 25% tax-free every year—it’s a lifetime allowance.

Things to Consider

If you take the tax-free lump sum and leave the rest of your pension invested, it may grow over time. However, taking too much too quickly could leave you short later in life. Always plan carefully and consider speaking with a financial expert.

For official guidance, visit the UK Government’s page on Tax on your private pension.

By understanding the rules, you can make the most of your pension savings while avoiding unnecessary tax.

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