Lifetime Allowance for Expatriate UK Pensions

Published / Last Updated on 21/07/2023

As many of you may be aware, the Lifetime Allowance (LTA) was introduced for UK pensions in April 2006.  The LTA is the maximum pension value (or equivalent) you can build up in UK pensions during your time.  The LTA for tax year 2022/23 was £1,073,100.  This also mean that the maximum tax-free cash lump sum (unless you had enhanced protection) was £268,275 (25% of the lifetime allowance in 2022/23).  If you exceeded this amount, you faced a tax charge when you took pension benefits in excess of the LTA up to 55%.

Spring Budget

In the Spring Budget 2023, the Chancellor announced that from tax year 2023/24:

  • Exceeding the LTA will face a tax charge of 0%.
  • The maximum tax-free cash lump sum will remain at £268,275 (25% of the old LTA limit).
  • From next tax year 2024/25, the LTA will disappear completely.

This means that most people will be able to build up and take as much pension as you can.  The question is, how does this affect expats with UK pensions?

Expats and the Lifetime Allowance

All UK pensions funds registered with HMRC are subject to lifetime allowance and lump sum restrictions whether you are resident in the UK or not.  This also means that expats will benefit from the 0% excess over lifetime allowance tax charge in 2023/24, the cap on lump sums and when the LTA disappears in 2024/25.

Caution:  2024/25 General Election

A UK general election is due in 2024 and Labour have already pledged to bring the lifetime allowance cap back.  Equally, we therefore expect Expats to be affected by the same.

Take Action Now

If you have large value UK pensions and you are an expat (as well as UK residents too), crystallising i.e., taking some of your pension benefits when there is no tax charge or no LTA before any general election may be prudent, particularly if an emergency budget is called after the election.

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