NEW LTA Rules
Redawg31
Member
We have a client who has £1.5mil LTA protection.
Has as Taken DB benefits of over £75k (income) and tax free cash of £225k in 2018 and paid a lifetime allowance charge on his income.
He also has a DC worth around £900k. Under the new rules, does he have an entitlement to a further £150k Tax free cash (£375-225k)? and are there any other implications of him crystallising.
we just cant seem to interpret the new rules when it comes to this scenario. He has no LTA left, but does he now have CLA now? is there benefit to crystallising all, or just crystallising for the TFC.
thanks in advance for any help.
Andrew
Comments
There are no rules to interpret yet as the Finance Bill with the transitional rules has not been issued (perhaps today).
My understanding is though because they have used 100% of their personal LTA they will have no lump sum allowance going forward
thanks, are you THE Les Cameron?
Entirely possible ;-)
Having just skimmed the draft legislation, I'm interested to know whether the "transitional tax-free amount certificate" mentioned in para 125 and then defined from para 127 onwards is intended for this situation?
I don't have time to read it in full now because a LOT of words, but I'm fairly hopeful.
Les, when you and your team inevitably go through this, can you comment on whether a divorcee with both enhanced protection (no PCLS) and a pre-2006 disqualifying credit (which was a subsequent 1.1m BCE) might get a transitional TFA certificate?
I'm doubtful, but in theory this new certificate allows for the possibility to wipe away the deemed pre-commencement pension 'penalty' where no PCLS was actually paid.
I feel like there's an entire half day session available just on the myriad scenarios related to this new certificate !
LTA webinar next Thursday!
I think at a high level it's fairly straightforward...
Your LSA and LSDBA get reduced based on LTA usage.
As an example 50% LTA usage would result in you deducting £134,137.50 from your lump sum allowance.
What the new certificates do is provide the necessary evidence to allow you to get a lower deduction, so a higher LSA.
It appears these certificates are only relevant for people who have crystallised benefits prior to April 23.
The original question.
As they have used 100% of LTA the starting point is a 100% reduction in LSA to £0.
But if they can get a certificate proving they have only had £225,000 they will get that as a deduction instead - so £150,000 will become their lump sum allowance.
During the consultation HMRC suggested if 100% used that was you finished but if you had less than 100% you could prove your tax free amount number. Was a little surprised to see people who had used 100% getting to do this too. But then it wasn't fair that someone with 99% could and someone with 100% couldn't .
I MEANT APRIL 24
Prior to April 2024 includes all pre-commencement pensions though, eh?
Everything pre-2006 was also pre-2024.
Hi Les,
Could you provide the link to register for the webinar next week?
Aye, but there is meant to be a new valuation methodology for those - not got to that bit yet!
Not convinced yet, might just be 06-24 by the looks of it. BUT pre 2006 affects LSDBA which affects PCLS calc!
LTA webinar next Thursday at 2pm (should be enough time to digest the bill by then).
https://events.mandg.com/lifetime-allowance-the-final-chapter
Hi,
In the webinar there was mention to lots of new tech content being up within a day. Is there a link to the updated articles?
Hi
That was the Q&A would be up within a day. Our LTA pages we still need to do - they'll be up this side of Xmas hopefully.
The Q&A is in the M&G Wealth Technical Group on LInkedIn - https://www.linkedin.com/groups/12749123/
Ah thanks.
I don't do social media so not available to me then 😢