CHANGES TO THE LIFETIME ALLOWANCE
The Lifetime Allowance tax charge in respect of savings in excess of the Lifetime Allowance was removed from April 2023 (with individuals taxed at their marginal tax rates instead) and ended on 5 April 2024.
From 6 April 2024, the Lifetime Allowance was replaced by two new allowances which generally work as follows:
- The Lump Sum Allowance (LSA)
A cumulative maximum limit of £268,275 (i.e. 25% of the 2023/2024 Lifetime Allowance) on the amount of tax-free lump sum payable on retirement.
- The Lump Sum and Death Benefit Allowance (LSDBA)
A cumulative limit of £1,073,100 (i.e. the 2023/2024 LTA) on the tax-free elements of lump sums that can be paid in life and death, to or in respect of an individual.
The new allowances are overall allowances that apply across all of your registered pension arrangements. If any cash lump sums that you take or that are paid on your death exceed either of the new allowances, the recipient will be taxed at their marginal rate of Income Tax.
If you think these changes will affect you or if you’ve applied for and hold any valid HMRC tax free lump sum protections, you should take financial advice from an FCA regulated adviser. You can find one in your local area by visiting the following website: https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/lifetime-allowance-for-pension-savings – please bear in mind you will need to pay for any regulated advice.