Guide On Lifetime Allowance|DNS Accountants
by Vidit Agarwal Marketing DirectorUnderstanding Lifetime Allowance
A Lifetime allowance is a limit or maximum value of pension
benefit that an individual can draw from all the registered pension schemes
without paying a lifetime allowance tax charge. If an individual take any
amount above the personal lifetime allowance as lump sum is taxed at 55%.The
lifetime allowance tax charge is paid by pension scheme administrator on behalf
of pension scheme holder to HMRC. The basic standard or personal lifetime
allowance is £1.0mn for the tax year 2016/17.The lifetime allowance was introduced
on April 2006 but not remained at the same level,
Lifetime Allowance For 2017/18
Lifetime allowance is also known as basic standard or
personal lifetime allowance. For the most people, current lifetime allowance is
£1.0mn for the tax year 2017/18.Your lifetime allowance depends on how many
pension scheme you belong to and type of pension pot you get. Certain types of tax
protection that will affect personal lifetime allowance, If an individual has:
- Fixed protection 2012 the standard lifetime allowance is £1.8mn,
- Fixed protection 2014 the standard lifetime allowance is £1.5mn,
- Fixed protection 2016 the standard lifetime allowance is £1.25mn.
From 6 April 2018, the government wants to index the Lifetime
Allowance annually in line with the Consumer Prices Index (CPI).
Tax Rates, If You Go Above Your Lifetime Allowance
If the amount of the payouts from the pension pots exceeds the
personal lifetime allowance, the rate of tax you pay on any amount above your
lifetime allowance depends on how the money is paid to you: if you get it as
lump sum, lifetime allowance tax rate would be 55% and if you get it any other
way such as retirement income, cash withdrawals, pension payment, the lifetime
allowance tax rate would be 25%
Compare change in lifetime allowance since April 2006 to 2018.
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Created on Feb 15th 2019 07:44. Viewed 226 times.