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Tax on pension lump sum

27 replies

CountingQuiche · 29/12/2025 14:20

Hope that this is a fairly straightforward question.

I have a work pension that is currently untouched.
I want to take out a small lump sum.
I have received the information from the pension people.
25% of the lump sum is tax-free.
Tax is payable on the rest (tax calculated at circa £1k)

I don't currently pay any tax. We are both retired and live off my husband's savings/pensions/investments. I have £20k in an ISA in my name.

Will I be able to claim this tax back?
If so, how do I do it?
I have never filled in a tax return or had anything to do with HMRC.

TIA

OP posts:
Puddingpiper · 30/12/2025 11:17

Please speak to an IFA as much of the advice you are receiving on here is incorrect. Majority of financial advisers do not charge for a first appointment which is information gathering and education. If you decide to stay with them most take fees (not commission) via your pension/investments but you can pay from your personal bank account should you wish. If you wish to message me I may know someone in your area

LivingInMinecraft · 31/12/2025 11:54

messybutfun · 29/12/2025 22:01

It’s not an either/or.

You can take any number of uncrystallised fund pension lump sums and later all remaining tax-free cash only.

This would make sense if you don’t have taxable income now but will in the future.

It is also now no longer in most people’s interest to retain any tax-free cash post the age of 75.

Yes someone could use a combination of the withdrawal options until their tax free lump sum is exhausted, but for the purposes of making this single £6k withdrawal the OP can choose one option or the other.

Which method will be most beneficial overall from a tax perspective depends on many factors the size of the pension pot and the planned rate/ timing of later withdrawals, whether there are plans for further contributions into the fund in future, how prevailing tax rates may change before later cash is withdrawn, what other income will be received in this and other withdrawal years and whether withdrawals will tip someone just over a tax threshold, whether there is ISA allowance available for withdrawals to be placed into an ISA instead if not used immediately, etc.

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