The Chancellor’s Budget announcement in March this year included the biggest change to pensions taxation for over a decade, with the removal of the Lifetime Allowance tax charge and an increase in the Annual Allowance. These changes became law in July when the Finance (No. 2) Act 2023 received Royal Assent.

The Lifetime Allowance sets the total value of all the pension savings you can build up before having to pay additional tax. It had been expected to remain at its previous level of £1,073,100 until 2026 but following the Finance (No. 2) Act 2023, the tax charge for exceeding the Lifetime Allowance has been removed for the 2023/2024 tax year and further legislation is expected to remove it completely with effect from 6 April 2024. Further details on the Lifetime Allowance can be found on the HMRC website: www.gov.uk/tax-on-your-private-pension/lifetime-allowance

The Annual Allowance limits the amount you can pay into your pension savings in a tax year without having to pay an additional tax charge. The standard Annual Allowance has been increased from £40,000 to £60,000 with effect from 6 April 2023. There have also been increases in the special annual allowances which apply for certain high earners (Tapered Annual Allowance) and individuals who have already accessed some of their pension savings in a particular way (Money Purchase Annual Allowance). Further details on the Annual Allowance can be found on the HMRC website: www.gov.uk/tax-on-your-private-pension/annual-allowance

The paragraphs above summarise the current legislative position, but this could of course change in future Budgets. As ever, if you are making decisions about your financial future, we recommend getting independent help and advice, especially if you think you may be affected by any of the tax changes announced as part of the budget. MoneyHelper is an excellent place to start. It can also help you to find an authorised independent financial adviser (IFA) in your area.