The LTA is the total amount you can build up from all your pension savings in your lifetime without incurring a tax charge. The LTA from 6th April 2016 is £1m.
Exceeding the Lifetime Allowance
If you are over the limit, tax on the excess is charged at:
- 25% on your pension in excess of your personal LTA.
- 55% on your lump sum
However, the tax free lump sum is the lower of 25% of the:
- remaining capital value or,
- standard LTA based on:
- £1.8m for Fixed Protection
- £1.5m for Fixed Protection 2014, Primary Protection and Enhanced Protection;
- £1.25m for Fixed Protection 2016;
- The value of your LTA as at 5 April 2014 for Individual Protection 2014;
- The value of your LTA as at 5 April 2016 for Individual Protection 2016.
The pension commencement lump sum automatically crystallises before the pension therefore using any available LTA first.
For changes to the Lifetime Allowance from 6 April 2016 please see 2016/17 LTA Changes.