How to reduce UK tax liability after cashing in pension pot

Next time you post the question before you act. What you did was utterly, utterly stupid. You will lose 45% income tax.

Go to a good tax advisor to see if the situation can be salvaged. If he charges you £5,000 to fix it, thats dirt cheap compared to paying £150,000 in taxes. Normally 25% of cashed in pension are tax free but some forms need to be filled out before taking the money. Hopefully that’s fixable. Then the next £37,700 a year cost 20% income tax. So all you had to do was spread the cash withdrawal over several years. If that can be fixed you’d have to return the money.

But there is a worse case: A scammer making you invest your pension in a fake investment fund. So you are promised 20% if you invest your £300,000 with them. The scammer told you no tax would be paid to get your money. With your money, he does a runner. So your pension money is gone. HMRC doesnt care that your money went to a scammer, they want your taxes, so now your pension is gone and you owe HMRC. (One police officer lost his complete pension fund to a scammer and now owes HMRC £150,000, that was quite widely publicised.)

Call your pension provider asap and see if the transaction can be reversed. According to this Times article regarding taking lump sums (original version, paywall bypass version) there may be a cooling off period of up to 30 days, but time is of the essence - call (don't write, or email) your pension provider and talk to them regarding options about reversing the transaction. At least by contacting them you will be registering your decision that you want to reverse it and they will tell you what time limits you have.

Once the money is safely back in your pension then speak to a tax adviser as to how you can access it more tax efficiently.

Mate, been there, done that. HMRC’s emergency tax is brutal when you cash out a big pension lump sum. But don't worry you haven’t 'lost' £102k, it's just a temporary overcharge. They assume you’ll get £304k every month (lol) and tax you like that.

Since you're on a small £12,570 salary as a director, your normal tax is nil. But when they slapped that pension payout on top, it pushed everything into the higher/additional tax bands.

Once the tax year ends (after April 5, 2026), just file a self-assessment online. HMRC will recalculate based on your actual yearly income and refund the excess tax. You should easily get £20k–£25k back, maybe even more

You haven’t lost the £102k it’s just sitting in HMRC’s bank instead of yours for now. But yeah, annoying as hell. The actual tax owed should be way lower, assuming no other income or dividend bonanza this year.