From 6 April 2024, the government removed the Lifetime Allowance (LTA) and replaced it with new allowances including the:
- Lump Sum Allowance (LSA)
- Lump Sum and Death benefit allowance (LSDBA)
- Overseas Transfer Allowance (OTA)
You're entitled to the following standard allowances:
- LSA of £268,275 - this is the maximum amount of tax-free retirement lump sum
- LSDBA of £1,073,100 - this is the maximum amount of tax-free retirement, serious ill-health, and death lump sum
- OTA of £1,073,100 - this is equal to the amount of your lump sum and death benefit allowance
This is the maximum amount of lump sum that 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.
If you have LTA protection, this is still valid if the protection meets the HMRC validation requirements and has not been lost.
You’re entitled to the protection which may provide a higher LSA and LSDBA or have a protected right to a higher lump sum allowance.
If you’ve previously taken a lump sum, this will reduce the amount of the charge free lump sums available.
Read more information about lump sum allowances on our website.
Benefit crystallisation event before 6 April 2024
If you’ve been paid a tax-free lump sum that qualified as a benefit crystallisation event (BCE) before 6 April 2024, the amount of LSA and LSDBA that is available to you will be adjusted to take account of the previous lump sum payments.
How the allowances are adjusted depends on whether you have a transitional tax-free amount certificate (TTAFC).
If you do not have a transitional tax-free amount certificate 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, and 25% of the total standard or protected LTA used 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.
Read more about lump sum allowances in HMRC’s tax manual.