UK Budget announcement on Lifetime Allowance and Annual Allowance tax
In the latest UK Government budget on 15 March the Chancellor announced that the Lifetime Allowance will effectively be abolished. The Annual Allowance will increase from £40,000 to £60,000. These changes will come into effect on 6 April 2023.
These changes will generally affect members who would be considered ‘higher earners’. For Lifetime Allowance, this is members who have built up pension savings of more than £1,073,100 across all of their pensions (not including state pension), or those who would expect their pension savings to exceed this amount.
SPPA members will not be affected by this change if their pension savings will be below the level where the tax would be applied.
We are currently working through how this could impact you and will update this article as soon as we have more information.
What is the Lifetime Allowance?
The lifetime allowance is the total amount you can build up in all your pension savings without incurring a tax charge. The current Lifetime Allowance is set at £1,073,100. This means that you had to have saved more than this amount in all your pensions (not including the state pension) before you would pay an additional tax charge. From 6 April 2023 this tax charge will be abolished.
If you have applied for your retirement and believe you are impacted by these changes, you can contact us.
What is the Annual Allowance?
The Annual Allowance is the limit on how much you can save into your pension in a tax year (6 April to 5 April) before you have to pay tax.
Find out more about pension tax changes announced by the UK Treasury.