LTA is a ceiling imposed by HMRC for people to withdraw pension benefits, and if the ceiling is breached, additional tax charges must be paid to HMRC. The current limit is £1,073,100, but limits have varied over time, and therefore each time a person has withdrawn pension benefits, a percentage of LTA used has been recorded. If a member breaches 100%, that’s when an additional tax charge is due.

The LTA is being removed from 6th April 2024, and it is being replaced instead with a limit on tax free cash of £268,275, including any previous amounts of tax free cash taken. Pensions taken as taxable income will no longer have a limit.

If you hold LTA protection, your tax free cash allowance will be higher, however, if the type of protection is ‘enhanced protection’ it is more complex.

If you think these changes affect you, and you want more information, please contact us