You can take your 25% tax-free pension amount more than once
18:17, 03 Oct 2026Updated 18:21, 03 Oct 2026
You can take your 25% tax-free pension amount more than once
HMRC has clarified the rules around taking a lump lump sum from your pension. The department referenced a “month one” rule which pensioners should consider when working out their tax liability.
A pensioner in their 60s reached out to HMRC via social media seeking clarification about their pension withdrawals, having already exhausted their tax-free lump sum. They were attempting to determine the correct tax treatment of their payments, reports Mirror.
HMRC provided some general guidance that could prove valuable when planning your retirement income. HMRC said: “You can take your 25% tax-free pension amount more than once by using phased drawdown or taking multiple smaller lump sums from a single pot, or by accessing multiple separate pension pots.”
You’re entitled to withdraw up to 25% of any pension pot’s value as a tax-free lump sum. Across all your pension schemes combined, the maximum you can extract this way stands at £268,275.
These lump sum withdrawals become available from age 55, which marks the point at which you can begin accessing and drawing down from your pension savings. However, this access age is set to rise to 57 in April 2028.
Income tax rates
You can earn up to £12,570 each year without paying income tax. Once your income moves above this, you pay:
20 per cent – on your income between £12,571 and £50,270.40 per cent – on your income between £50,271 to £125,14045 per cent – on your income above £125,140.
This applies in England, Wales and Northern Ireland. Another rule to note is that once your income moves above £100,000, you start to lose the £12,570 personal allowance.
You lose £1 of the allowance for each £2 you earn above £100,000, so you lose it entirely when your income reaches £125,140.
It’s also worth noting that from April 2028, the state pension age will increase to 67. Currently, the state pension age is being phased up from 66 to 67, with the transition taking place gradually between April 2026 and April 2028.
HMRC also explained how your lump sum is taxed, should you take out an amount above the 25% limit. The group said: “If you’re taking a pension lump sum, the first 25 per cent is tax free and the remaining is taxed on a week 1 month 1 basis.”
The idea of a week one month one tax calculation is that the amount is taxed in isolation, not taking into account any other earnings or tax you have paid that year. You will usually pay income tax at your marginal rate on any lump sum you take out, above the 25 per cent threshold.