HMRC’s latest private pension data has revealed the tax take on breaches of the Lifetime Allowance (LTA) in 2022/23 tax year, was over £500 million, making it a ppotential means to fill th UK finances ‘black hole’ recently announced by the Chancellor.
In 2022/23, a total of 13,080 LTA charges were reported by schemes through AfT (Accounting for Tax) returns. This is an increase from 11,720 LTA charges reported in 2021/22.
The total value of LTA charges reported by schemes in 2022 to 2023 was a record £516 million and an increase from £501 million in 2021 to 2022.
This is leading to speculation that the Government could u-turn on its previous statement it would not re-introduce the LTA.
David Brooks, head of Policy at independent pensions consultancy Broadstone, sees it as a possibility. He says: “Under the last government, the Lifetime Allowance (LTA) was a lucrative source of tax revenue for the Treasury, overseeing a spike in tax receipts until its abolition in the Spring Budget of 2023. This was largely due to its reduction to £1m in 2016 and then freezing it in 2020.”
“With the Chancellor setting out her game-plan for filling in the hole in the UK’s finances, and with more pain set to come at the Autumn Statement, reviving the LTA may be under consideration given Labour’s previous statements before the General Election campaign.
“The balancing act of raising revenue from large pension savings together with the complexity that could emerge from the reintroduction of the Lifetime Allowance, which limits pension income rather than the current regime which only restricts tax-free cash, will be very difficult. It is possible that the Chancellor will look at more subtle ways of taxing richer pensioners via National Insurance.”
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