On what number is the LTA Excess tax charged?

ADA58

On what basis is the tax levied on an excess over the LTA , For example taking the standard LTA of 1073100 and an assumed transfer from a DB of 1200000 is the 25 % applied ( assuming left in a SIPP)  to the delta , or if you pay an IFA  30,0000 for advice leaving a 1170000 transfer  is the tax charge on this delta rather than the slightly higher one stated before. 

 I know the difference will not lead to a decision one way or another, but I do like to understand how it works 

zagfles

The LTA is used up or charged when you crystallise on the amount crystallised. It's not charged on a transfer.

Google LTA BCE

ADA58

clear , thank you 

gm0

It is applied on the excess not the whole amount only when you have exceeded 100% crystallisation of DC cash (LTA value) or 20x DB benefit.  The penalty rate applied is 25% for income drawn, higher for lump sum taken (55%) if in the zone

The other material tax planning gotcha to be aware for DC or DB transferred to DC is investment growth from pension commencement age (whatever it is  >55 presently) to 75. 

Any crystallised funds i.e. in the pension invested but marked for drawdown will likely (hopefully) grow in that 20 year period. If the money is left in the pension i.e. drawings are too modest - then any amount >LTA on a cash compare is taxed at age 75 in the "backstop" BCE which addresses both any benefits as yet uncrystallised and ALSO nominal cash growth of the pension investments already "tested" when they were crystallised.  Everyone is tested again. What you crystallise prior does not change this.

Standard LTA is indexed and will be higher at 75 than now so the inflation part of growth is addressed to a degree (which may or may not be the real inflation you see or what the market thinks it is but you will be protected by a CPI uprating for the standard LTA if the government keeps its word for 20 years.  Transitional protection certificate LTA values are not indexed (a cunning scheme to make them disappear after a while).

This extra age 75 test requires care to make use of nil-rate and basic rate bands each year as applicable to your work and overall income situation so that these annual tax allowances are not foregone during what may be 20 years leaving a lump which will then be penalty taxed at 25% and then by income tax as drawn post 75. A different cash flow would have seen the money safely  either consumed or already taxed at low rate and moved to an S&S ISA (inside IHT estate but not subject to the arbitrary 25% penalty on growth).