Pension commencement excess lump sum and tapered annual allowance

Hi, An individual is taking a large defined benefit pension in the current tax year. The pension commencement lump sum will be partly over their remaining lump sum allowance, and therefore taxable as income as a "pension commencement excess lump sum". Does this taxable excess need to be included in their “net income” when calculating their tapered annual allowance for 2024/25? (I have previously asked this question, but at the time it could not be answered as we were not yet in 2024/25.)

Hi Sam Blanning,
Please refer to guidance here:
Work out your reduced (tapered) annual allowance
Thank you. 

Thanks for the quick response. I've looked through the guidance and I can't see whether a pension commencement excess lump sum would be included as net income?

Hi,

The taxable element of the pension commencement lump sum, which is taxable, would be entered in box 11 for pensions. This will be included to work out your net income. You can see more information at page 7 of the following guidance:

How to fill in your tax return

Thank you.

So if I understand correctly, pension commencement excess lump sums *do* now affect the tapered annual allowance calculation. Unlike in 2023/24 (per HMRC's answer to https://community.hmrc.gov.uk/customerforums/pt/70f72f4f-66eb-ee11-a81c-6045bd0df281), or in previous years when Lifetime Allowance excess lump sums were not subject to income tax.

Hi,

You can see guidance here:

Work out your reduced (tapered) annual allowance

Thank you.