PTM174100 - Lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Lump sum allowance availability

As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on . If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of .

Relevant benefit crystallisation events
Benefit crystallisation events pre-April 2024 without a transitional tax-free certificate
Transitional tax-free amount certificates and lump sum allowance availability
Used-up lifetime allowance
Determining the members LTA previously-used amount

From 6 April 2024, individuals will be entitled to a new lump sum allowance. An individual바카라 사이트™s lump sum allowance is £268,275 unless they have a protected right to a higher lump sum allowance or transitional rules apply.바카라 사이트¯â¶Ä¯

If an individual exceeds their available lump sum allowance when a relevant benefit crystallisation event occurs, the excess of their available lump sum allowance will be subject to income tax at the individual바카라 사이트™s marginal rate. 바카라 사이트¯

Relevant benefit crystallisation events can only occur from 6 April 2024, prior to this date the principles of benefit crystallisation events (BCEs) applied (you can read more about BCEs on the National Archives).

Once the first relevant benefit crystallisation event has occurred for an individual, the individual will need to determine their lump sum allowance availability for each subsequent event.바카라 사이트¯â¶Ä¯

There will be some individuals that have had benefit crystallisation events (BCEs) prior to 6 April 2024. These individuals will need to rely on transitional rules to calculate their lump sum allowance availability at their first relevant benefit crystallisation event.

These transitional rules apply from the 2024-25 tax year.

Relevant benefit crystallisation eventÌý

Chapter 15A Section 637Q ITEPA 2003바카라 사이트¯

For the purposes of the lump sum allowance, a relevant benefit crystallisation event occurs when an individual has becomes entitled to a relevant lump sum.바카라 사이트¯

A relevant lump sum for the purposes of the lump sum allowance is:바카라 사이트¯

  • A pension commencement lump sum (PTM63200)바카라 사이트¯
  • An uncrystallised funds pension lump sum (PTM63300)바카라 사이트¯
  • A stand-alone lump sum (PTM063430)바카라 사이트¯â¶Ä¯

You can read more about relevant benefit crystallisation events at PTM173000.바카라 사이트¯ 바카라 사이트¯

Where an individual has more than one relevant benefit crystallisation event on the same day, the individual can decide the order in which they are considered to occur.바카라 사이트¯

Benefit crystallisation events pre-April 2024 without a transitional tax-free certificateÌý

Paragraph 125 Schedule 9 Finance Act 2024바카라 사이트¯

If an individual has had one (or more) BCEs occur prior to 6 April 2024, these events must be reflected when calculating the individual바카라 사이트™s remaining lump sum allowance availability via the standard transitional calculation. 바카라 사이트¯

Where the individual doesn바카라 사이트™t hold a valid transitional tax-free amount certificate, this is achieved by deducting 25% of the individual바카라 사이트™s lifetime allowance previously-used amount from the lump sum allowance. For most individuals this is £268,275, unless they hold a valid protection.
바카라 사이트¯
If the individual바카라 사이트™s lifetime allowance previously-used amount after the 25% deduction, is greater than or equal to the lump sum allowance, then the individual바카라 사이트™s lump sum allowance after applying the transitional calculation will be nil. This means the individual will be unable to take further lump sums tax-free. 바카라 사이트¯

°Õ³ó±ðÌý outlines which circumstances would have resulted in a BCE prior to 6 April 2024.바카라 사이트¯â¶Ä¯

Example 1

George has a relevant benefit crystallisation event on 7 April 2024. He receives a pension commencement lump sum (PCLS) of £20,000. To work out his available lump sum allowance he must first deduct a percentage of the value of any benefit crystallisation events (BCEs) that occurred prior to 6 April 2024.바카라 사이트¯â¶Ä¯바카라 사이트¯
바카라 사이트¯â¶Ä¯â¶Ä¯â¶Ä¯
George does not have a transitional tax-free amount certificate. George바카라 사이트™s lifetime allowance previously-used amount at 5 April 2024 is £100,000. 25% of this figure (£25,000) is deducted from his lump sum allowance:바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
£268,275 - £25,000 = £243,275.바카라 사이트¯â¶Ä¯ 바카라 사이트¯â¶Ä¯

George바카라 사이트™s available lump sum allowance at 6 April 2024 is £243,275. Therefore, George바카라 사이트™s lump sum allowance is sufficient for him to receive the tax-free PCLS of £20,000.바카라 사이트¯
바카라 사이트¯â¶Ä¯
The amount of the relevant benefit crystallisation event occurring on 7 April 2024 then needs to be deducted from this figure.바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
£243,275 바카라 사이트“ £20,000 = £223,275바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
George바카라 사이트™s lump sum allowance at 7 April 2024 is £223,275.

Example 2

Lilian has a relevant benefit crystallisation event on 7 April 2024. She receives an uncrystallised funds pension lump sum (UFPLS) of £10,000. 75% of this lump sum will be subject to income tax at her marginal rate, and 25% will be tax free if she has sufficient lump sum allowance available. To work out her available lump sum allowance she must first deduct a percentage of the value of any benefit crystallisation events (BCEs) that occurred prior to 6 April 2024.Ìý

Lillian does not have a transitional tax-free amount certificate.ÌýLilian바카라 사이트™s lifetime allowance previously-used amount at 5 April 2024 is £200,000.바카라 사이트¯25% of this figure (£50,000) is deducted from her lump sum allowance.바카라 사이트¯â¶Ä¯Ìý

£268,275 - £50,000 = £218,275바카라 사이트¯â¶Ä¯Ìý

Therefore, Lillian바카라 사이트™s available lump sum allowance at 6 April 2024 is £218,275.바카라 사이트¯â¶Ä¯Ìý

The tax-free element of the relevant benefit crystallisation event occurring on 7 April 2024 then needs to be deducted from this figure.바카라 사이트¯â¶Ä¯Ìý

25% of £10,000 = £2,500바카라 사이트¯Ìý

£218,275 - £2,500 = £215,775바카라 사이트¯Ìý

Lillian바카라 사이트™s lump sum allowance at 7 April 2024 is £215,775

Transitional tax-free amount certificates and lump sum allowance availabilityÌý

Paragraph 125 and 127 Schedule 9 Finance Act 2024바카라 사이트¯
바카라 사이트¯
If an individual has taken less of their benefits before 6 April 2024 as tax-free lump sums than assumed under the standard transitional calculation, and the individual has complete evidence of this, they can request a transitional tax- free amount certificate from their certification administrator.바카라 사이트¯â¶Ä¯
바카라 사이트¯
If an individual holds a tax-free amount certificate that has been issued by a certification administrator, this will state the amount of the individual바카라 사이트™s lump sum transitional tax-free amount.바카라 사이트¯â¶Ä¯
바카라 사이트¯
The lump sum transitional tax-free amount is the total of the following amounts (if any) that the individual was entitled to prior to 6 April 2024:바카라 사이트¯ 바카라 사이트¯

  • Pension commencement lump sums바카라 사이트¯
  • Uncrystallised funds pension lump sums바카라 사이트¯â¶Ä¯
  • Stand- alone lump sums바카라 사이트¯

so far as no income tax charge has arisen in respect of these lump sums.바카라 사이트¯

If the member had a pension in payment before 6 April 2006 and had no benefit crystallisation event between the 5 April 2006 and 5 April 2024, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount. 바카라 사이트¯â¶Ä¯ 바카라 사이트¯

The lump sum transitional tax-free amount is deducted from the lump sum allowance to calculate the individual바카라 사이트™s available lump sum allowance.바카라 사이트¯â¶Ä¯
바카라 사이트¯
If the deduction results in a negative figure, then the available lump sum allowance is nil.바카라 사이트¯â¶Ä¯
바카라 사이트¯
You can read more about transitional tax-free amount certificates at PTM174300. 바카라 사이트¯

Example

Eva has a relevant benefit crystallisation event on 17 July 2024. She receives a pension commencement lump sum (PCLS) of £30,000. Eva already has a transitional-tax free amount certificate confirming that her transitional tax-free amount is £10,000.바카라 사이트¯â¶Ä¯바카라 사이트¯Ìý

The information Eva provided to her certification administrator was accurate and complete.바카라 사이트¯Ìý

Eva바카라 사이트™s transitional tax-free amount is deducted from her lump sum allowance:바카라 사이트¯â¶Ä¯Ìý

£268,275 - £10,000 = £258,275바카라 사이트¯â¶Ä¯Ìý

Eva바카라 사이트™s lump sum allowance at 6 April 2024 is £258,275.바카라 사이트¯Therefore, Eva바카라 사이트™s lump sum allowance is sufficient for her to receive the tax-free PCLS of £30,000.Ìý

The amount of the relevant benefit crystallisation event occurring on 17 July 2024 then needs to be deducted from this figure.바카라 사이트¯â¶Ä¯Ìý

£258,275 - £30,000 = £228,275바카라 사이트¯â¶Ä¯Ìý

Eva바카라 사이트™s lump sum allowance at 17 July 2024 is £228,275.

Used-up lifetime allowanceÌý

Paragraph 125 Schedule 9 Finance Act 2024바카라 사이트¯

If, before 6 April 2024, an individual has already used an amount that is equal to or greater than their previous lifetime allowance then the individual바카라 사이트™s lump sum allowance after applying the transitional calculation will be nil. This means the individual will be unable to take further lump sums tax-free.바카라 사이트¯

Individuals who have used an amount that is equal or greater than their previous lifetime allowance can still make an application for a transitional tax-free certificate if they meet the requirements to do so outlined at PTM174300. 바카라 사이트¯

Determining the members LTA previously-used amount

For administrative ease, schemes may determine a member바카라 사이트™s LTA previously-used amount by converting their LTA percentage used as at 5 April 2024 into a monetary amount.

The LTA previously-used amount in relation to an individual means the amount that would have been the previously-used amount for the purpose of Section 219 of Finance Act 2004 if a BCE had occurred in relation to the individual immediately before 6 April 2024.

If an individual:Ìý

  • Reached the age of 75 before 6 April 2024, and
  • On reaching that age and amounts were crystallised by one of more of BCE 5, 5A and 5B, and
  • They did not become entitled to a lump sum under a registered pension scheme in the period beginning with the date the individual reached 75 and ending on 5 April 2024

then the LTA previously-used amount is to be reduced by the amount of one (or more than one where relevant) of BCE 5, 5A and 5B.