Rosalind Connor comments on the proposed abolition of the lifetime allowance
In the Spring Budget 2023, the chancellor announced plans to abolish the lifetime allowance (LTA), removing barriers for HM Revenue & Customs.
Managing partner Rosalind Connor explained that while the chancellor announced the abolition of the LTA in his budget, in practice he was getting rid of any LTA charges – the tax from exceeding the LTA – from 6 April, but taking longer to work out what to do with the “complex framework” of the LTA.
She said this could lead to “some rowing back in the future as the structure is dismantled”.
Rosalind also questioned the reason given by government for abolishing the LTA – that it would help avoid people giving up work because of the LTA charge.
She said this “seemed unlikely” as the charge only arises when a pension is paid, and there were plenty of arrangements that people can put in place to avoid accessing sufficient of their savings to hit the charge – adding the reality could be that the LTA had outlived its usefulness.
“It is only speculation, but it might be possible that the LTA charge has become unattractive for HMRC and the Treasury. Probably, the majority of people who reach their LTA are well enough advised to make use of the various methods to prevent a charge becoming due.”
“The administrative burdens of providing the protections may be quite significant on HMRC, and if the LTA charge is not bringing in much revenue, it may well make sense to remove the burden and the charge simultaneously.”
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