New figures from HMRC have revealed that pensions lifetime allowance (LTA) penalty prices added a report £516m to the Treasury’s coffers within the 2022-23, the yr earlier than it was abolished in April.
That would tempt the federal government to reinstate it, pension consultancy Broadstone has warned.
HMRC launched its annual non-public pension statistics final week. They confirmed that, in 2022-2023, a complete of 13,080 LTA prices had been reported by schemes via AfT (Accounting for Tax) returns.
That was a rise from 11,720 LTA prices reported in 2021-2022.
The overall worth of LTA prices reported by schemes in 2022-2023 was £516m, up from £501m in 2021-2022.
David Brooks, head of coverage at Broadstone stated: “Below the final authorities, the LTA was a profitable supply of tax income for the Treasury, overseeing a spike in tax receipts till its abolition within the spring Price range of 2023. That was largely resulting from its discount to £1m in 2016 after which freezing it in 2020.”
Mr Brooks stated that as a consequence the brand new Chancellor Rachel Reeves might be wanting on the cost as a strategy to increase the so-called ‘black gap’ she stated she discovered within the nation’s funds.
The Labour Celebration had pledged to reinstate the LTA however deserted the pledge within the run-up to the election, based on studies.
He stated: “With the Chancellor setting out her game-plan for filling within the gap within the UK’s funds, and with extra ache set to come back on the Autumn Assertion, reviving the LTA could also be into account given Labour’s earlier statements earlier than the overall election marketing campaign.”
He stated the balancing act of elevating income from massive pension financial savings along with the complexity that would emerge from the reintroduction of the lifetime allowance, which limits pension earnings somewhat than the present regime which solely restricts tax-free money, will probably be very tough.
Mr Brooks added: “It’s potential that the Chancellor will have a look at extra refined methods of taxing richer pensioners by way of Nationwide Insurance coverage.”
The LTA figures within the HMRC non-public pension statistics are right here.
Earlier than its abolition in April the lifetime allowance stood at £1,073,100. It was the utmost worth of advantages that might be taken from a registered pension scheme with out being topic to a cost. How a lot was charged relied on how the person took their advantages. Any extra over the lifetime allowance taken as a lump sum was charged at 55%, whereas any extra used to supply an earnings, by both a pension annuity or earnings drawdown. was charged at 25% however withdrawals had been then taxed on the particular person’s marginal price of earnings tax.
The Finance Act 2024 set out the primary laws for the abolition of the lifetime allowance, together with an uncommon clause permitting the Treasury to make subsequent modifications to the first laws via regulation.
