How much tax will I pay if I take my pension pot as a lump sum?

If you decide to take a lump sum from your pension pot, it's important to understand how taxes work. Here's a simple breakdown:

- The first 25% of your pension pot is tax-free (to a maximum of £268,275)
- The remaining 75% is subject to income tax, the exact amount will depend on your total income.

When you first access your pension, you might be taxed at an emergency rate to ensure you're not underpaying. This is managed automatically through the PAYE system.

Depending on your total income, you may pay less income tax overall by taking money from your pension gradually, rather than in one large lump sum.