PTM174200 - Lump sum allowance and lump sum death benefit allowance: Transitional rules for the tax year 2024-25: Lump sum and death benefit 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 amount certificate
Benefit crystallisation events pre-April 2024 with a transitional tax-free amount certificate
Used-up lifetime allowance
Determining the members LTA previously-used amount

From 6 April 2024, individuals will be entitled to a new lump sum and death benefit allowance. An individual바카라 사이트™s lump sum and death benefit allowance is £1,073,100 unless they have a protected right to a higher lump sum and death benefit allowance.

If an individual exceeds their available lump sum and death benefit allowance when a relevant benefit crystallisation event occurs, the excess of the lump sum or lump sum death benefit paid will be subject to income tax at the recipient바카라 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 crystalisation 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 and death benefit 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 and death benefit allowance availability at their first relevant benefit crystallisation event. These transitional rules apply from the 2024-25 tax year.바카라 사이트¯â¶Ä¯바카라 사이트¯

Relevant benefit crystallisation events 

Chapter 15A Section 637S ITEPA 2003바카라 사이트¯

For the purposes of the lump sum and death benefit allowance, a relevant benefit crystallisation event occurs when an individual becomes entitled to a relevant lump sum or a person is paid a relevant lump sum death benefit in respect of the individual on or after 6 April 2024.바카라 사이트¯

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

  • A pension commencement lump sum (PTM63200)
  • A serious ill-heath lump sum바카라 사이트¯(PTM063400)
  • An uncrystallised funds pension lump sum (PTM63300)
  • A stand-alone lump sum (PTM63300)

A relevant lump sum death benefit for the purposes of the lump sum and death benefit allowance means any lump sum death benefit other than:바카라 사이트¯

  • A charity lump sum death benefit (PTM073900)
  • A trivial commutation lump sum death benefit (PTM073700)

A relevant lump sum death benefit does not include a lump sum death benefit to the extent that it is paid in respect of rights that were crystallised before 6 April 2024.바카라 사이트¯You can read more about relevant benefit crystallisation events at PTM173000. 바카라 사이트¯

Multiple lump sum death benefits being paid

Chapter 15A 637T ITEPA 2003

Where an individual has more than one relevant benefit crystallisation event on the same day, they are to be treated as occurring:바카라 사이트¯

  • Immediately before the individual바카라 사이트™s death,바카라 사이트¯ and
  • Immediately after any PCLS to which the individual becomes entitled immediately before death.

An individual's LSDBA availability on the occurence of multiple relevant benefit crystallisation events occurring if they have previously had BCEs is the amount left after the previously-used amount is deducted and the relevant proportion is deducted.

The relevant proportion is:

A/B

Where:

A - the amount of lump sum death benefit which relates to the relevant benefit crystallisation event in question,

B - the aggregate of the amounts of each of the lump sum death benefits being paid which constitues relevant benefit cystallisation events on the same day.

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

Paragraph 126 Schedule 9 Finance Act 2024바카라 사이트¯

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

Where the individual doesn바카라 사이트™t hold a valid transitional tax-free amount certificate, this is achieved by deducting the appropriate percentage of the individual바카라 사이트™s lifetime allowance previously-used amount from their lump sum and death benefit allowance. For most individuals the LSDBA is is £1,073,100, unless they hold a valid protection.
바카라 사이트¯
The appropriate percentage is 100% if:바카라 사이트¯ 바카라 사이트¯

  • the individual became entitled to a serious ill-health lump sum before 6 April 2024 and was under the age of 75 at the time of the payment, or
  • the individual died before 6 April 2024 and was under the age of 75 at the time of their death, and a person was paid a lump sum death benefit in respect of the individual before 6 April 2024.바카라 사이트¯

Otherwise, the appropriate percentage is 25%.바카라 사이트¯ 바카라 사이트¯

Note that, where the 100% appropriate percentage applies, the individual바카라 사이트™s lifetime allowance previously used amount should not be apportioned.바카라 사이트¯â¶Ä¯

If the individual바카라 사이트™s lifetime allowance previously-used amount after the 25% deduction, is greater than or equal to the lump sum and death benefit allowance, then the individual바카라 사이트™s lump sum and death benefit allowance after applying the transitional calculation will be nil. This means the individual (or their beneficiaries) will be subject to income tax at their marginal rate on any subsequent lump sums or lump sum death benefits.바카라 사이트¯

Example 1 

Isha dies, aged 70, on 9 May 2024 and doesn바카라 사이트™t hold a transitional tax-free amount certificate.바카라 사이트¯â¶Ä¯바카라 사이트¯ 바카라 사이트¯â¶Ä¯바카라 사이트¯

Isha바카라 사이트™s lifetime allowance previously-used amount at 5 April 2024 is £200,000.
바카라 사이트¯
The benefits Isha has already received were uncrystallised funds pension lump sums within BCE6.바카라 사이트¯
바카라 사이트¯â¶Ä¯
Isha did not become entitled to a serious ill-health lump sum before 6 April 2024, or die before that date, so the appropriate percentage is 25%.바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
25% of £200,000 is deducted from Isha바카라 사이트™s lump sum and death benefit allowance.바카라 사이트¯â¶Ä¯바카라 사이트¯ 바카라 사이트¯â¶Ä¯

25% of £200,000 = £50,000바카라 사이트¯â¶Ä¯ 바카라 사이트¯â¶Ä¯

£1,073,1000 - £50,000 = £1,023,100바카라 사이트¯â¶Ä¯ 바카라 사이트¯â¶Ä¯바카라 사이트¯

Isha바카라 사이트™s lump sum and death benefit allowance at 9 May 2024 is therefore £1,023,100.바카라 사이트¯â¶Ä¯바카라 사이트¯

Example 2 

Justin died on 18 May 2024, aged 52.바카라 사이트¯

On 5 February 2023, prior to his death, he took a serious ill-health lump sum (SIHLS) of £800,000 from one of his pension schemes.바카라 사이트¯

He also had another pension fund but didn바카라 사이트™t take a SIHLS from that scheme before he passed away, so leaves £300,000 uncrystallised funds to his beneficiaries.바카라 사이트¯

Justin바카라 사이트™s lifetime allowance previously-used amount at 5 April 2024 is £800,000 (800,000 x1,073,100 / 1,073,100).바카라 사이트¯

As Justin became entitled to a serious ill-health lump sum before 6 April 2024, the appropriate percentage is 100%.바카라 사이트¯

100% of £800,000 is deducted from Justin바카라 사이트™s lump sum and death benefit allowance.바카라 사이트¯

100% of £800,000 = £800,000바카라 사이트¯

£1,073,100 - £800,000 = £273,100바카라 사이트¯

Justin바카라 사이트™s remaining lump sum and death benefit allowance at 6 April 2024 is therefore £273,100.바카라 사이트¯

£300,000 - £273,100 = £26,900바카라 사이트¯

The uncrystallised funds exceed Justin바카라 사이트™s lump sum and death benefit allowance by £26,900. Justin바카라 사이트™s beneficiaries will therefore pay income tax at marginal rate on the excess of £26,900 if it is paid as a lump sum death benefit.바카라 사이트¯

Example 3

Jocelyn died on 12 January 2024, aged 49. A lump sum death benefit of £100,000 was paid to her beneficiary in March 2024.바카라 사이트¯

Jocelyn바카라 사이트™s lifetime allowance previously-used amount at 5 April 2024 is £100,000 (100,000 x 1,073,100 / 1,073,100).바카라 사이트¯

As a lump sum death benefit was paid in respect of Jocelyn before 6 April 2024, and she was under the age of 75 when she died, the appropriate percentage is 100%.바카라 사이트¯

100% of £100,000 is deducted from Jocelyn바카라 사이트™s lump sum and death benefit allowance.바카라 사이트¯

100% of £100,000 = £100,000바카라 사이트¯

£1,073,100 - £100,000 = £973,100바카라 사이트¯

Jocelyn바카라 사이트™s remaining lump sum and death benefit allowance at 6 April 2024 is therefore £973,100.바카라 사이트¯

Benefit crystallisation events pre-April 2024 with a transitional tax-free amount certificate 

Paragraphs 126 and 127 Schedule 9 Finance Act 2024바카라 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 transitional tax-free amount certificate that has been issued by a registered pension scheme, this will state the amount of the individual바카라 사이트™s lump sum and death benefit transitional tax-free amount.바카라 사이트¯â¶Ä¯
바카라 사이트¯
The lump sum and death benefit 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¯â¶Ä¯

  • Each relevant lump sum바카라 사이트¯â¶Ä¯
  • Each relevant lump sum death benefit바카라 사이트¯
  • Each tax-free lump sum taken before 6 April 2006바카라 사이트¯ 바카라 사이트¯

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

If the member had a pension in payment before 6 April 2006 and had no benefit crystallisation between 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 and death benefit transitional tax-free amount.
바카라 사이트¯â¶Ä¯
The lump sum and death benefit transitional tax-free amount is deducted from the lump sum and death benefit allowance, to calculate the individual바카라 사이트™s available lump sum and death benefit allowance.바카라 사이트¯â¶Ä¯바카라 사이트¯
바카라 사이트¯â¶Ä¯
If the deduction results in a negative figure, then the available lump sum and death benefit allowance is nil. 바카라 사이트¯â¶Ä¯ 바카라 사이트¯

You can read more about transitional tax-free amount certificates at PTM174300. 바카라 사이트¯

Example

Avril dies, aged 72, on 30 April 2024 leaving £200,000 in a flexi-access drawdown and £500,000 uncrystallised funds.바카라 사이트¯â¶Ä¯바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯바카라 사이트¯
Avril바카라 사이트™s personal representatives provide records of her previous designations and payments to the certification administrator, which show that the only relevant lump sum Avril took was a PCLS of £100,000.바카라 사이트¯â¶Ä¯바카라 사이트¯ 바카라 사이트¯â¶Ä¯

The information the certification administrator holds is accurate and complete.바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
The administrator provides the personal representative with a transitional tax-free amount certificate showing the lump sum and death benefit transitional tax-free amount is £100,000.바카라 사이트¯â¶Ä¯바카라 사이트¯ 바카라 사이트¯â¶Ä¯

This must be deducted from Avril바카라 사이트™s lump sum and death benefit allowance:바카라 사이트¯â¶Ä¯ 바카라 사이트¯â¶Ä¯

£1,073,100 - £100,000 = £973,100바카라 사이트¯â¶Ä¯
바카라 사이트¯â¶Ä¯
Avril has £973,100 lump sum and death benefit allowance remaining.바카라 사이트¯â¶Ä¯바카라 사이트¯

Used-up lifetime allowance 

Paragraph 126 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 and death benefit allowance after applying the transitional calculation will be nil. This means the individual (or their beneficiaries) will be subject to income tax at their marginal rate on any subsequent lump sums or lump sum death benefits.

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 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 Finance Act 2004 if a BCE had occured in relation to the individual immediately before 6 April 2024.

If an individual:

  • reached the age of 75 before 6 April 2024, and
  • on reaching that age and amounts were crystallised by one or 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 that one where relevant) of BCE 5, 5A and 5B.