Pension commencement excess lump sum and tapered annual allowance

An individual is taking a large DB pension in 2024/25. 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?

Hi Sam Blanning,
HMRC cannot comment on future events as legislation and/or plans may change.
Thank you. 

Fair enough, thanks for the quick response. May I ask a second question: If they draw the DB pension in this 2023/24 tax year, meaning that under the existing rules they will have a Lifetime Allowance Excess Lump Sum taxable as income, would that LTA Excess Lump Sum be included in their net income when calculating their tapered annual allowance for this tax year?

Hi,

Any sum that exeeds the pension savings threshold, is taxable, but, it does not affect the calculation of personal allowances.

It is only after your tax liability for the year is calculated that the excess is added into the calculation, using the highest rate of tax applicable so that the tax due can be calculated, minus any tax treated as paid by the pension pot.

Thank you.