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If you’re thinking about taking £50,000 from your pension to pay off a mortgage, fund home improvements, or cover a major expense, it’s important to understand how much tax you might have to pay.
Although 25% of any money you take out of your pensions can usually be taken tax-free, the rest is taxed as income, with the amount of tax you’ll pay depending on factors such as your other income and tax band.
Here, we explain how much tax you might have to pay were you to withdraw a £50,000 lump sum from your pension, and look at ways you might be able to keep any potential tax bills to a minimum.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
Can I take £50,000 from my pension?
If you’ve saved enough, you can take £50,000 from your pension in many cases, but whether you’ll be able to do so depends on your age, the size of your pension pot, and how you withdraw the money. Most people can start accessing their defined contribution pension from age 55 (rising to 57 in 2028), although some schemes have their own rules about when benefits can be taken. Find out more about this in our guide When can I retire?
Although you can take large lump sums like £50,000, it’s important to think carefully before doing so. Taking money out early reduces the amount left invested in your pension and could affect how much income you have later in retirement. Because of this, many people choose to withdraw smaller amounts gradually or take a regular income instead of one large lump sum.
How much tax will you pay if you take £50,000 out of your pension?
The amount of tax you’ll pay if you take £50,000 out of your pension will depend on how much other income you have.
Below, we show three examples of how your tax bill could vary. When we refer to the State Pension, we’ve used the maximum new State Pension amount for the 2026/27 tax year which is £12,547 (£241.30 a week). To qualify for this amount, you‘ll usually need to have made at least 35 years of National Insurance Contributions. Find out more about the State Pension in our guide What will the State Pension be in 2026?
Example 1: £50,000 pension withdrawal, no other income
| Amount | Tax rate | Tax due | |
| Tax-free pension cash (25% of £50,000) | £12,500 | 0% | £0 |
| Remaining taxable pension | £37,500 | ||
| Personal allowance applied | £12,570 | 0% | £0 |
| Remaining taxable income | £24,930 | 20% | £4,986 |
| Total tax bill | £4,986 | ||
| You receive after tax | £45,014 |
Example 2: £50,000 pension withdrawal, plus full State Pension (£12,547 a year in the 2026/27 tax year)
| Amount | Tax rate | Tax due | |
| Tax-free pension cash (25%) | £12,500 | 0% | £0 |
| Remaining taxable pension | £37,500 | ||
| Personal allowance remaining | £23 | 0% | £0 |
| Remaining taxable income | £37,477 | 20% | £7,495 |
| Total tax bill | £7,495 | ||
| You receive after tax | £42,505 |
Example 3: £50,000 pension withdrawal and still working (£40,000 salary)
| Amount | Tax rate | Tax due | |
| Tax-free pension cash (25%) | £12,500 | 0% | £0 |
| Taxable pension withdrawal | £37,500 | ||
| Salary | £40,000 | ||
| Total income | £77,500 | ||
| Personal allowance | £12,570 | 0% | £0 |
| Basic-rate band (£50,270 total) | £37,700 | 20% | £7,540 |
| Higher-rate portion | £27,230 | 40% | £10,892 |
| Total tax bill | £18,432 | ||
| You receive after tax | £31,568 |
Earning a salary of £40,000 pushes more of the withdrawal into the higher-rate band. Even though £12,500 is tax-free from the pension, the remainder interacts with other income to determine the amount of income tax you’ll need to pay.
At a glance: tax on £50,000 pension withdrawal
| Situation | Tax on £50k withdrawal | Money received |
| With no other income | £4,986 | £45,014 |
| With full State Pension (£12,547) | £7,495 | £42,505 |
| With £40k salary | £18,432 | £31,568 |
Why you might be charged emergency tax
The above examples assume you’ll pay standard rates of income tax. However, pension providers often apply an emergency tax code to first pension withdrawals, which can mean overpaying tax initially.
This is because HMRC usually taxes the first flexible withdrawal someone makes in a tax year on what’s known as a ‘Month 1’ basis, which assumes that the same amount will be withdrawn from the pension each month, even when that’s not the case. You can reduce the risk of making a significant tax overpayment by only taking a small amount from your pension initially, rather than a large lump sum.
However, if you do take a big lump sum out you should be able to claim any overpaid tax back by filling out an HMRC form. The type of form you’ll need to fill out will depend on how you’ve chosen to access your retirement pot:
- If you withdrew all your pension savings and received no other taxable income that tax year, use form P50Z
- If you withdrew all your pension savings but had other taxable income that tax year, use form P53Z
- You’ve withdrawn some cash from your pension, but not all of it; you should use form P55
Find out more in our article Have you overpaid tax on your pension? How to claim it back.
How can I reduce tax on a pension lump sum?
If you don’t need the £50,000 all at once, you may want to consider spreading withdrawals over a couple of tax years to reduce your tax liability.
For example, if you took the full amount in one tax year, and assuming you have no other income, you could take £12,500 tax-free (25% of the amount withdrawn). This would leave a taxable portion of £37,500. Once your £12,570 personal allowance is deducted, the remaining £24,930 is taxed at 20%, giving you a tax bill of £4,986.
However, if you decided to take £25,000 one year and £25,000 the following year, £6,250 of each withdrawal would be tax-free and £18,750 taxable. After the £12,570 personal allowance is deducted, this leaves £6,180 of each withdrawal taxed at 20%, which gives a tax bill of £1,236 each year, or total tax of £2,472. This is less than half the amount of tax you’d pay if you took out the full £50,000 at once.
Learn more in our article How to reduce your tax bill when you take money out of your pension.
Can I take £50,000 from my pension tax-free?
There is one way you can take £50,000 tax-free – but it doesn’t mean you’ll escape a hefty tax bill.
As previously mentioned, most pensions usually allow you to take up to 25% of your pension pot tax-free. So if your total pension pot is £200,000, 25% of that is £50,000, which could be taken completely tax-free. If your pot is smaller than £200,000, you cannot get £50,000 tax-free, as 25% is always the maximum tax-free portion.
The tax bill arises on the remaining £150,000, and how you decide to take it.
For example, if you decide to use flexi-access drawdown, whereby your pension savings remain invested but you can withdraw money as and when you like, every pound you withdraw above the 25% tax-free is added to your income for that year and taxed at your marginal income tax rate.
For example, if you take all £150,000 in one year and have no other income, most of it would fall into the higher tax bands (40% and maybe 45%), so you’d face a very large tax bill.
Here’s how that tax bill would be worked out based on 2026/27 tax rates:
- The first £12,570 personal allowance: £0 tax payable
- The amount between £50,270 and £12,570, which comes to £37,700, is taxed at the basic rate of 20%. This means tax of £7,540 (20% of £37,700)
- The amount between £125,140 and £50,270, which comes to £74,870, is taxed at the higher rate of 40%. This means tax of £29,948 (40% of £74,870)
- The amount between £150,000 and £125,140, which comes to £24,880, is taxed at the additional rate of 45%. This means tax of £11,187 (45% of £24,860)
Total tax = £7,540 + £29,948 + £11,187 = £48,675
Alternatively, if you bought an annuity with the remaining £150,000, the income you’d receive from the annuity is taxed as income, but you won’t get a huge one-off tax hit, as the tax is spread over the years. So while you would be able to take £50,000 tax-free, taking the rest all at once could trigger huge taxes. That’s why people often take smaller withdrawals out of their pension gradually, or consider an annuity. Learn more in our guide Annuity vs drawdown: which is right for you?
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
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