Previously breached LTA - impact to remaining funds with abolition of LTA

Hi - I am in receipt of a defined benefit pension.  When I first took my combination of lump sum and regular income I breached the lifetime allowance individual protection limit, for which I paid the tax due at the time.  I have some funds in a SIPP from a subseqent employment.  I understood at that time that any withdrawals would be subject to 25% tax, along with tax at marginal rate, or 55% tax on lump sums.  Also any funds in the SIPP would be subject to a 25% charge when I reach 75.  With the abolition of the LTA are these additional taxes still payable? 

Comments

  • gm0
    gm0 Posts: 1,148 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    edited 14 August 2024 at 12:23AM
    Additional taxes are not payable on further first crystallisation. 
    As the LTA charge was abolished
    At 100% with TFC already used - there likely is no more of that to be had under LSA unless you fall into one of the narrow transitional situations.

    The 25% LTA charge levy was first moved to 0% in the tax year prior to final abolition. And then abolished. 

    So a transaction in year 0 (before the cycle of legislation) to crystallise an existing DC pension with LTA already exhausted i.e. at 100% used.  Would have attracted the LTA charge then current for an above limit crystallisation i.e. a 25% rake (marked for income).  And then that crystallised pot, net of income drawn would have been raked again for any nominal growth net income (again at 25%) at age 75 - the insidious and unlamented crystallised growth test.  Or if untouched uncrystallised by age 75 - it would be tested with the same result via the uncrystallised growth test. BCE 5a 5b as was.

    Bringing that up to date

    In year 1 (the transition year) - the LTA "charge" at first crystallisatio of a given pension benefit slice - was still calculable and payable legally on a DC crystallisation but zero rated.   So amount crystallised above LTA x 0 = 0 charge. But no tax free cash available above the LTA.  Zero penalty.  Zero TFC

    Then in year 2+ (now) - it was abolished and the old calculation is no longer done.

    The LSA limits relate to managing the available TFC.  If you have had yours per your earlier IP certificate limit.  Then you are likely done on that.  But still benefit from the change - today.

    I am a consumer.  I recommend you consult adviser training web materials in case there is something subtle about your tax free cash usage prior.
  • TEC6245
    TEC6245 Posts: 20 Forumite
    Seventh Anniversary 10 Posts
    Thank you, appreciate you taking the time to do this.
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