Further detail has been published in respect of the changes announced for the lifetime allowance (LTA). The removal of the LTA charge takes effect for any benefit crystallisation event occurring on or after 6th April 2023 and is replaced by an income tax charge for benefits in excess of the LTA. HMRC has published an LTA Guidance Newsletter here.
HMRC has since confirmed an amendment to the guidance via its LTA Working Group; that schemes may continue to use the current process for taxation of lump sum death benefits. Based on information provided by Legal Personal Representatives, HMRC will then raise marginal rate taxation (as opposed to an LTA charge) on the applicable portion of these payments. HMRC will approach affected beneficiaries following the end of the tax year in line with the existing process but with marginal rate charge instead of the LTA charge. This process will continue until they develop a longer-term position for the full abolition of the LTA from 6 April 2024. Further information will continue to be provided in LTA specific Pension Scheme Newsletters.
GRiD’s Regulatory Committee will be issuing a more detailed guidance note for members in due course.