Overview
From 6 April 2023, the tax charge for breaching the Lifetime Allowance (LTA) will be removed and the allowance itself will be scrapped from April 2024.
The current LTA of £1,073,100 will be abolished from 6 April 2024. In 2023/24, LTA checks still need to be done, but if the allowance is exceeded there won’t be an LTA charge.
It is important to note that the abolition of the LTA has not yet been turned into legislation and may still be subject to change. The government has stated that it will consult on the proposal before making a final decision.
You can find the detailed proposed legislation for these changes in the Finance Bill.
HMRC will also continue to give updates via their Pension schemes newsletters as information becomes available.
What is it?
The pension Lifetime Allowance (LTA) is the maximum amount of savings an individual can make in a registered pension scheme without incurring a tax penalty.
However, with the abolition of the LTA charge, individuals can now contribute as much as they like to their pension schemes without fear of being penalised for exceeding the allowance. Subject to Annual Allowance limits which for most people is £60,000 for the 2023/24 tax year.
What this means
This is particularly good news for those with pensions of significant value, as they will no longer be forced to limit their contributions to avoid a tax charge. If you paused pension contributions because you were concerned you might breach the LTA, you may decide you want to make further tax-efficient additions to your pot. It is also worth noting that the government tax relief on pension contributions will still be available, the amount of relief applied is linked to the individual’s income tax rate. This means individuals can continue to benefit from this incentive.
