Spring Budget 2023 Annual Allowance and Lifetime Allowance
Published / Last Updated on 15/03/2023
Pension Lifetime Allowance (LTA) Abolished
LTA was introduced in 2006, this is the maximum value or equivalent value your can accumulate in pension value during your lifetime. The Lifetime Allowance stood at £1,073,100 in 2022/23. If you exceeded this allowance, you would face tax penalties. Speculation was that it would be increased in the Budget to £1,800,000 but it has been totally abolished from 06/04/2023 meaning you will no longer face excess LTA tax charges if your pension fund is large.
Pension Annual Allowance (AA) Increased
This is the maximum value or equivalent value that can be contributed by both you and your employer to your pension schemes each tax year – this is a combined amount into all pensions. The Annual allowance has been increased from £40,000 pa to £60,000 pa from 06/04/2023. If you exceed this allowance, you face tax penalties.
- If you earn £20,000 pa, the maximum that can be paid into your pension is the lower of your salary or £40,000 pa i.e., £20,000 pa.
- If you earn £60,000 pa, the maximum that can be paid into your pension increases on 06/04/2023 from £40,000 pa to £60,000 pa.
How are Annual Allowance and Lifetime Allowance Calculated: Pension Allowances
Our view
This move is designed to encourage experienced and senior workers to stay in work rather than being forced to resign e.g., senior NHS workers stopping work as tax penalties did make it worthwhile staying on. It may also encourage workers who have taken early retirement to return to work and stop the experienced/senior worker ‘brain drain’.
Contact us for Help:
