How pension tax-free cash works — and the £17,400 mistake to avoid

Take your pension the wrong way and you could hand HMRC £17,400 — from the same pot, same money. This video explains how tax-free cash works, six good reasons to take it, and how to draw it without the tax bill.

We follow Mr Pickles and his £100,000 pension from start to finish.

Figures based on 2025/26 tax year: personal allowance £12,570, basic-rate band to £50,270, lump sum allowance £268,275.

From April 2027, unused pension funds are expected to count towards inheritance tax.

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*Please note:*

The information provided is based on the current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislation and regulations allow.

All references to taxation are based on my understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances.

This channel is for information and education purposes only. Any information or guidance given does not act as financial advice. Please consult a financial adviser if you are unsure in anyway.

Keep in mind that the value of your investments can go down as well as up, so you could get back less than you invest.