UK budget abolishes pensions lifetime allowance

The main tax changes announced in the UK spring 2023 budget related to pensions. The predicted rise from £40,000 to £60,000 in the annual tax-free has now been confirmed, with the big surprise being the scrapping of the lifetime allowance (LTA).

First introduced by Gordan Brown in 2006 to bring in more tax from society’s wealthiest, the lifetime allowance was significantly reduced over recent years and arguably disincentivised pension saving.

Chancellor Jeremy Hunt is hoping that abolishing it will help retain the senior workforce within the NHS and tempt some to return.

What do these changes to pensions mean?

With the lifetime allowance in place, anyone whose pension funds (excluding state pension) amount or grow to over £1,073,100 (unprotected LTA) would have to pay additional tax penalties of 55% for lump sums or

By Kelman

25% for income or overseas transfers. As of 6 April 2023, however, the LTA tax rate will effectively reduce to zero before being scrapped entirely in the 2024 Finance Bill.

Other pension changes effective from 6 April 2023 include:

The Annual Allowance for pension contributions increases from £40,000 to £60,000 and the Money Purchase Annual Allowance and minimum Tapered Annual Allowance from £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance also increases from £240,000 to £260,000.

The maximum Pension Commencement Lump Sum for those without protections is retained at £268,275 and frozen for those without protections thereafter.

Do you need to act now?

For many people who have pension funds above £1 million (or likely to swiftly exceed it) there may be options to transfer to a suitable alternative pension scheme depending on their personal situation. It’s worth seeking specialist, regulated advice to look at your situation now. Pension transfers can take several months and the clock is ticking towards the next UK general election which must be held by 24 January 2025, and which may well see things change radically.

Following the budget, Shadow Chancellor Rachel Reeves stated the move was “ the wrong priority, at the wrong time, for the wrong people” and that “a Labour govern- ment will reverse this move”. Recent poll numbers suggest that Labour could very well form the next UK government.

The reinstatement of the lifetime allowance on pensions is certainly not guaranteed, but given that senior members of a political party that could win the election made a definitive statement that could easily belong to an election manifesto, the possibility should not be ignored.

Other budget changes

The starting rate for savings will be frozen at £5,000, enabling individuals with less than £17,570 in employment income to receive up to £5,000 of savings income free of tax. Annual ISA subscription limits remain unchanged.

The government will formalise and extend an existing income tax concession for low-income trusts and estates. Calculations and reporting will become more straightforward and HMRC intends to amend inheritance tax regulations to remove non-taxpaying trusts from reporting requirements.

The various income tax allowances and the National Insurance contributions thresholds remain frozen until April 2028, and the additional rate threshold reduced to £125,140.

The two inheritance tax nil rate bands also remain frozen until 2028, and the cuts to the capital gains tax exemption threshold and the dividend allowance, announced in the Autumn Statement, go ahead as planned.

Take personalised advice to ensure your tax planning is up to date, both for the UK and Spain, and to full benefit from any positive tax reforms.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com.

THE Real Club de Golf La Brisas recently hosted the 24th edition of the ‘Pro‐Am Memorial Sebastián de Miguel’, a moving charity event in aid of local cancer care charity, Cudeca.

The tournament was played over two days with a practice day beforehand, al‐lowing competitors to bring their ‘A’ game to the green. The course was also in excel‐lent condition and delightful weather ensured players were able to showcase their skills.

The tournament had teams of one professional and three amateurs. Prizes were award‐ed to the best performers in various categories.

This unforgettable experi‐ence was made possible by the support of several spon‐sors, including Reale Seguros, Galpe Agencia de Seguros, Helicópteros Sanitarios, Inter‐national Marbella and Grupo Riversa. During the tourna‐ment, €5,000 was donated to Cudeca.

The money will go towards supporting the foundation’s vital work, which includes home care, day care, rehabili‐tation, counselling, and out‐patient consultation. Cudeca attends to the needs of ad‐vanced stage disease patients with personalised, round‐the‐clock care provided by spe‐cialised teams.

The tournament was a huge success, bringing golfers together for a good cause and raising funds for a charity that provides essential care to people in need.

Trade Awards

FIFTEEN businesses from the old town and the western district of Marbella were ac‐knowledged on Tuesday, April 11. The mayor Angeles Muñoz presented the repre‐sentatives of these business‐es with Trade Awards at the Royal Hospital of Mercy.

The mayor highlighted “It is a tribute with which we want to recognise the en ‐trepreneurs who continue to contribute to the interna‐tional projection of Marbel‐la.” They also acknowledged how proud they are of all the businesses in the area saying the service they offer is outstanding even more so after a Semana Santa that saw occupancy rates back to pre‐pandemic figures.