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Pension recycling rules checker
The tax-free-cash recycling conditions tested one by one — the £7,500 cumulative trigger, the 30%-of-the-lump-sum contribution test and the pre-planning question of fact — with the unauthorised-payment charge illustrated on the whole lump sum where every limb holds.
Free, no sign-up. Runs the same engine and versioned tax-year config as the signed-in suite — the pension and bond calculation workbench UK paraplanners use to produce compliance-annex PDFs. Your calculator figures stay in this browser unless you choose to share or rerun them in the signed-in workbench. How we verify the numbers.
— In short
The pension recycling rule (FA 2004 Sch 29 para 3A; PTM133810) treats a pension commencement lump sum as an unauthorised member payment where tax-free cash is taken and, because of it, contributions to registered pension schemes are significantly greater than they otherwise would have been — and this was pre-planned. Every condition must be met before the rule engages; where it does, the charge falls on the whole lump sum, not just the recycled part.
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Pension Recycling Rules
Tax year 2026/27 · Last reviewed 20 Jul 2026
Every condition, tested one by one.
The pension commencement lump sum from the payment you’re testing — the charge base if every condition is met.
Every tax-free lump sum taken in the 12 months ending with this event, INCLUDING the figure above — so this can never sit below it. Used for the £7,500 trigger only: that is the one test the rule aggregates over (FA 2004 Sch 29 para 3A(3)). The 30% test is measured against this event’s lump sum alone.
The adviser-judged increase over the contributions that would otherwise have been paid — summed across the tax year of the lump sum, the two before and the two after (PTM133830).
The cumulative trigger, the contribution proportion and the charge rates all come from the selected year’s versioned config.
HMRC treats this as a question of intention — the checker never decides it for you (PTM133820).
Unsure what counts as an additional contribution, or how the rolling 12 months aggregates? The pension recycling rules guide walks each condition with examples.
For planning and illustration purposes only. Verify all inputs against source documents. This tool does not constitute financial or tax advice.
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— How it's calculated
The £7,500 cumulative trigger
The tax-free lump sums taken in the rolling 12-month period ending with the assessed payment — including that payment — must together exceed £7,500 (for lump sums paid on or after 6 April 2015). At or below the trigger the recycling rule cannot engage, whatever the contribution pattern. The test is cumulative precisely so a large lump sum cannot be sliced into smaller payments to slip under it.
Two separate 30% tests — different denominators
Because of the lump sum, contributions must be significantly greater than they otherwise would have been. HMRC measures this over a five-tax-year window — the year the lump sum is paid, the two before and the two after — and accepts as a rule of thumb that an increase is significant where the cumulative additional contributions exceed 30% of the contributions that would otherwise have been expected. The expected baseline is a matter of adviser judgement on the facts: an established pattern of regular saving continued unchanged is not an increase.
A separate condition then tests the same additional contributions against 30% of the pension commencement lump sum itself — this event’s lump sum, not the rolling 12-month total, which is aggregated only for the £7,500 trigger. The two tests share a percentage but not a denominator, and they can land on opposite sides: in HMRC’s own example a £3,500 increase on an expected £10,000 a year is a significant increase, yet does not exceed 30% of the £35,000 lump sum (£10,500), so the rule is not triggered. The checker computes the second test and takes the first as your judgement.
FA 2004 Sch 29 para 3A(4) · PTM133830 · PTM133860 Ex 4
When the rule cannot apply at all
Two statutory carve-outs disapply the rule outright. The lump sums taken in the rolling 12 months must exceed £7,500 — at or below that, recycling cannot apply whatever the contributions look like. And the rule does not apply where the member had reached age 75 when the contributions were paid and none of those contributions were paid by an employer. The checker tests the first; it holds no age or funding-source input, so the age-75 carve-out is one to check yourself before relying on any figure it shows.
FA 2004 Sch 29 para 3A(3) · para 3A(4A) · PTM133810
Pre-planning — a question of fact
The recycling must have been pre-planned: when the lump sum was taken, the intention to use it — directly or indirectly — to fund significantly greater contributions must already have existed. HMRC treats this as a question of intention decided on the facts, and the onus of showing it rests with HMRC. It cannot be computed from the figures, which is why the checker asks for it as an adviser answer and never decides it.
The consequence — the whole lump sum, at 40%
Where every condition is met, the whole pension commencement lump sum of the assessed event — not merely the recycled portion — is treated as an unauthorised member payment. The member is liable to the 40% unauthorised-payments charge (FA 2004 s.208); a further 15% unauthorised-payments surcharge (s.209) applies only where unauthorised payments reach 25% of the value of the member’s pension rights, and the scheme administrator may separately face a scheme sanction charge.
— How to check the pension recycling rules
Step 1
Enter the tax-free cash from this event
Start with the pension commencement lump sum from the payment being tested — if every condition is met, the charge falls on this whole amount, not the recycled part.
Step 2
Aggregate the rolling 12 months
Add every tax-free lump sum taken in the 12 months ending with this event, including this one. The rule tests the cumulative figure against the £7,500 trigger, so smaller payments cannot slip under it separately.
Step 3
Enter the additional contributions
Sum the contributions above what would otherwise have been expected across the five-tax-year window — the year of the lump sum, the two before and the two after. The rule tests them against 30% of this event’s tax-free cash — the £7,500 trigger is the only test that aggregates the rolling 12 months.
Step 4
Answer the pre-planning question and read the condition tree
Pre-planning is a question of intention only the facts can answer — the checker takes your answer as given. It then tests each condition and, only where all of them hold, illustrates the 40% charge on the whole lump sum with the 15% surcharge shown separately as conditional.
— Worked example
- Cumulative 12-month tax-free cash (exceeds the £7,500 trigger)
- £40,000
- 30% contribution threshold (30% × this event’s lump sum)
- £12,000
- Additional contributions — exceed the threshold
- £25,000
- Unauthorised payment: the WHOLE lump sum
- £40,000
- Unauthorised-payments charge at 40%
- £16,000
- 15% surcharge — conditional only
- £6,000
Figures computed live by the same engine the checker above runs. The charge base is the whole £40,000 lump sum, not the recycled part (PTM133840); the 15% surcharge applies only where the unauthorised payment is 25% or more of the member’s pension rights (PTM134100) and is never added to the headline charge automatically.
— Frequently asked questions
What are the pension recycling rules?
An anti-avoidance rule in FA 2004 Sch 29 para 3A (PTM133810). A pension commencement lump sum is treated as an unauthorised member payment where tax-free cash is taken; contributions to registered pension schemes are significantly greater than they otherwise would have been because of it; the increase was pre-planned; the cumulative lump sums over 12 months exceed £7,500; and the additional contributions exceed 30% of the tax-free cash. Every condition must be met — if any one fails, the rule is not engaged.
How much tax-free cash triggers recycling?
The trigger is cumulative: the tax-free lump sums taken in the rolling 12-month period ending with the assessed payment — including that payment — must together exceed £7,500 (PTM133810). At or below £7,500 the rule cannot apply. Exceeding the trigger does not by itself engage the rule: the significant-increase test and the pre-planning condition must also be met.
What is the penalty for recycling?
Where every condition is met, the whole lump sum — not just the recycled part — is treated as an unauthorised member payment (PTM133840). The member is liable to the 40% unauthorised-payments charge (FA 2004 s.208), and a 15% surcharge applies where unauthorised payments reach 25% of the value of the member’s pension rights (s.209; PTM134100), taking the combined charge to 55%. The scheme administrator may also face a scheme sanction charge.
Is regular pension saving after tax-free cash recycling?
Not by itself. Contributions that would have been paid anyway — an established pattern of regular saving — are not significantly greater because of the lump sum, so the significant-increase condition, measured against the contributions that would otherwise have been expected, is not met (PTM133830). That is a separate test from the one comparing the additional contributions with 30% of the lump sum itself (FA 2004 Sch 29 para 3A(4)); both must be met, and they can give different answers. The rule only engages where all the conditions hold, including pre-planning (PTM133820), which is a question of intention decided on the facts.
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