Published 3rd April 2023
This note applies to UK residents only
Lifetime Allowance
The government announced that from 6th April 2023, the Lifetime Allowance Charge (applied where the Lifetime Allowance was exceeded) will be removed. The Lifetime Allowance will be fully abolished from the 2024/25 tax year (this will be included in a future Finance Bill).
HMRC has published Pensions scheme newsletter 148 setting out some complexities arising from this two stage approach, and how pension scheme administrators should deal with the changes. This includes information on pension commencement lump sums and other lump sums. Pensions scheme newsletter 148 is an excellent publication setting out clearly the restrictions, thresholds and charges that apply from 6th April 2023.
In particular the Lifetime Allowance Charge is abolished from 6th April 2023 and the Lifetime Allowance will be abolished from 6th April 2024.
There are changes to the arrangements for a Pension Commencement Lump sum and other lump sums.
The Annual Allowance is increased from £40,000 to £60,000, and the minimum allowance for those on tapered allowance is increased from £4,000 to £10,000. For those who may have a tapered allowance, the Adjusted Income limit has increased from £240,000 to £260,000 with effect from 6th April 2023.
If you wish to explore further the effect of the changes in Pension relief allowances and thresholds, or if you have any question regarding your pension you should consult your IFA.
For help with this or any other taxation matter, get in touch
The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.