LTA Allowance Tax charge
Knottygr
Member
how does HMRC decide what is a lump sum (taxed at 55%) and what is regular income (taxed at 25%)?
Does the client have to take a set level of income each month and if they exceed that they are taxed at 55%? that seems unlikely, but in theory the client could then take for example 50% of the fund one month and then a lower amount going forward and claim its regular income?
Might it have something to do with GAD limits?
Comments
In reality, it's a one-time deal to take the lump sum.
Every other method of withdrawal (Annuity/Drawdown) will be taxed via PAYE and so the 25% penalty will be applied in that case.
In other words, unless you've specifically instructed the excess to be paid to the client, you're in 25% territory.
Thanks