This is the maximum amount of lump sum which can be paid to you without incurring an income tax charge set by HM Revenue and Customs (HMRC) unless you have a protected right to a higher allowance.
From 6 April 2024, the government removed lifetime allowance (LTA) and replaced it with new allowances including the:
- LSA of £268,275 - this is the standard amount of tax-free retirement lump sum
- lump sum and death benefit allowance (LSDBA) of £1,073,100 - this is the standard amount of tax-free retirement, serious ill health, and death lump sum
- overseas transfer allowance (OTA) of £1,073,100
If you have valid LTA protection, this may increase the LSA, LSDBA, and OTA.
If you’ve previously taken a lump sum, this will reduce the amount of the charge free lump sums available.
Find more information about LSA on our website.
Benefit crystallisation event (BCE) before 6 April 2024
If you’ve been paid a tax-free lump sum which qualified as a BCE before 6 April 2024, the amount of LSA and LSDBA available to you will be adjusted to take into account any previous lump sum payments.
How the allowances are adjusted depends on if you have a transitional tax-free amount certificate (TTFAC).
If you do not have a TTFAC, your available LSA and LSDBA will be calculated using HMRC’s standard transitional calculation.
This looks at:
- the amount of LTA used from all your BCEs and any pre-6 April 2006 pensions
- 25% of the total standard or protected LTA used - this is deducted from both the LSA and LSDBA
If a serious ill health lump sum or a lump sum death benefit has been paid, 100% of the LTA used is deducted from the LSDBA.
If you used up 100% or more of the LTA before 6 April 2024, your available LSA and LSDBA would both be deemed to be zero.