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Posted Mon, 21 Aug 2023 10:43:32 GMT by
Dear HMRC colleagues, I want to ask a question about the new tax free lump sum rules after the changes in LTA. I have a defined benefit pension of £60k p.a. already crystallised. Multiplying by 20 gives you £1.2m, so I have exceeded the LTA limit. Also, I took 100% of the benefit as pension, and zero amount as tax free lump sum, because I valued the lifetime guarantee. In addition, I have a defined contribution pot of £1m, not yet crystallised. Under the old LTA rules, I would incur a penalty tax of 25% on income drawdown, and would not be able to take any tax free lump sum. After the recent changes, I understand that during tax year 2023/24, the penalty tax rate reduces to 0%, but a tax free lump sum is still not allowed if I have used up the LTA limit. My question is: after the abolition of the LTA regime in tax year 2024/25, will I be able to take 25% of the defined contribution pot as a tax free lump sum, i.e. £250k? - Also, do you know when the details of the new rules will be published, so that my pension provider can read them and implement them? Best regards,
Posted Thu, 24 Aug 2023 08:10:47 GMT by HMRC Admin 25
Hi Andrew Hitchcox,
Please refer to:
Lifetime allowance guidance newsletter — March 2023
The new rules wont be published until given Royal assent to be correct legislation.
Thank you. 

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