The Lifetime Allowance
The Lifetime Allowance is £1,073,100. From April 2023, there’s no extra tax charge for exceeding the Lifetime Allowance. While the Lifetime Allowance isn’t officially abolished until April 2024, no one will have to pay a Lifetime Allowance charge for the tax year 2023-2024. There used to be a 55% tax charge on Lifetime Allowance excesses paid out as a lump sum, this has now been removed and is subject to marginal rate income tax.
Tax-free cash
Your clients can take up to 25% of their pension as tax-free cash with an upper limit of 25% of their remaining Lifetime Allowance. Going forward, this means that if they have never taken tax-free cash before and have no Llifetime Allowance protection, the maximum amount they can take as tax-free cash will be frozen at £268,275. Any money taken from drawdown will be taxed as income. If the combined value of a client’s pensions is worth more than £1,073,100 they may be able to apply for Lifetime Allowance protection which could increase the amount of tax-free cash available.