LTA-Day tax changes

What has changed?

6 April 2024 (LTA-Day) marked the end of the lifetime allowance (LTA), with two new allowances introduced in its place, the “lump sum allowance” and the “lump sum and death benefit allowance”. The original timeframe for making the required changes was extremely tight, with two sets of substantial amending regulations coming into force as recently as November 2024.

With further updates to HMRC guidance still expected, checking pensions systems and processes to ensure they are up to speed remains a 2025 priority.

Key areas of focus

Trustees and their administrators (as well as employers) should satisfy themselves that all necessary steps have now been taken to cater for the post LTA-Day regime. These include:

• ensuring that the two new allowances are fully embedded into the scheme’s administration, and appropriate adjustments are being made for any individuals with LTA protections
• having a process to enable members who have taken benefits before LTA-Day to make applications for transitional tax-free amount certificates
• understanding the role of the new “pension commencement excess lump sum”, and the circumstances in which this might be available and whether rule alterations are needed to accommodate its payment

What’s next?

Although the post LTA-Day pensions tax regime is now in force, some pieces of the jigsaw are yet to fall into place. Further regulations are expected to iron out remaining wrinkles in the legislation, and HMRC continues to publish more guidance and updated PTM pages. So, there are still some more important developments to look out for ahead.