HM Revenue & Customs allowances

The Lifetime Allowance (LTA) was the maximum amount of saving an individual could build up in UK-registered pension schemes throughout their lifetime without incurring LTA tax charge.

This page provides a summary of the changes from 6th April 2024 and is provided for guidance purposes only. You should seek financial advice to understand the impact on you personally.

The LTA was abolished from 6th April 2024 and two new allowances which apply to lump sums (not pensions) were introduced: the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA). In addition the Overseas transfer allowance (OTA) was introduced.

Lump Sum Allowance (LSA)

For most members, the LSA will limit the amount which you can receive as a tax-free cash lump sum.

The standard LSA is £268,275 but if you used any LTA before 6th April 2024, you should note that your LSA will be reduced,

Lump Sum and Death Benefit Allowance (LSDBA)

In addition, the tax-free elements of other authorised lump sums paid in life and death (e.g. tax-free elements of serious ill-health lump sums and lump sum death benefits) will be tested against the LSDBA. This applies if you die before age 75.

If you take a tax-free cash sum from your pension (including a serious ill-health lump sum) then your LSDBA will be reduced by the same amount.

The standard LSDBA is £1,073,100 As with the LSA, if you used any LTA before 6th April 2024, you should note that your LSDBA will be reduced.

Important considerations

LTA protection: If you have a valid form of LTA protection and/or lump sum protection (e.g. Primary protection, Enhanced Protection or Fixed Protection), you may retain a right to a higher LSA and LSDBA than the standard allowances described above.

The amount will depend on the type of protection you have. If you think this might affect you, you may wish to seek advice.

Transitional provisions: As noted above, if you used up some (but not all) of your LTA before 6th April 2024, your LSA and LSDBA will be reduced. In most circumstances, 25% of the total LTA used will be set off against the allowances.

However, if you did not take the maximum 25% tax-free cash when accessing benefits before 6th April 2024, you or your personal representatives can request an alternative calculation and request a Transitional Tax-Free Amount Certificate.

You are only eligible to apply for a Transitional Tax-Free Amount Certificate if you have taken pension benefits between 6th April 2006 and 5th April 2024 and have not taken pension benefits from 6th April 2024 that used any of your LSA / LSDBA.

To understand if a Transitional Tax-Free Amount Certificate may benefit you, you will need to get advice as it will be specific to you individually.

However, you are only likely to benefit if you:

  • have ever taken pension benefits where you did not take a tax-free cash sum; or
  • turned 75 before 6th April 2024; or
  • do not have a protected LTA and have taken benefits / used LTA in the period 6th April 2016 to 5th April 2020 when the LTA was lower than £1,073,100; or
  • have transferred money overseas to a Qualifying Recognised Overseas Pension (QROPS).

If you used up all of your LTA before 6th April 2024, you will not have access to the new allowances at all.

Tax consequences of exceeding allowances: if the payment of a lump sum exceeds the remaining allowance, you will be taxed on the excess at your marginal rate of income tax.

Other benefits: The new allowances described above apply to each person across all registered pension schemes and not to each scheme.

Overseas transfer allowance (OTA)

The overseas transfer allowance is the maximum value of pension savings you can transfer overseas tax-free to a suitable qualifying overseas pension scheme.

If you go above this then you will be charged 25% tax on the excess. The standard allowance is £1,073,100 although some people may have a higher allowance.

If you have already taken any money from your pensions, then your overseas transfer allowance will be reduced by the same amount.

Previously, the charge applied only to some overseas transfers. From 6th April 2024, it applies to all of them where the allowance Is exceeded.