Finance Act 2024

Availability of individual’s lump sum and death benefit allowance U.K.

126 (1) This paragraph applies where—

(a) one or more benefit crystallisation events within the meaning of Part 4 of FA 2004 occurred in relation to an individual before 6 April 2024, F1 ...

(b) a relevant benefit crystallisation event within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) occurs in relation to the individual on or after that date. [F2 , and]

[F3 (c) at the time the relevant benefit crystallisation occurs, the individual is not an individual to whom paragraph 12 of Schedule 36 to FA 2004 applies (enhanced protection).]

(2) Where the individual’s lifetime allowance previously-used amount is equal to or greater than the individual’s lifetime allowance, none of the individual’s lump sum and death benefit allowance is available on the occurrence of the relevant benefit crystallisation event.

(3) Otherwise, the amount of the individual’s lump sum and death benefit allowance that is available on the occurrence of the relevant benefit crystallisation event is—

(a) the amount of that allowance that is available in accordance with section 637S of ITEPA 2003 on the occurrence of that event, less

(b) an amount equal to the appropriate percentage of the individual’s lifetime allowance previously-used amount;

or, if that produces a negative result, nil.

[F4 (3A) Where—

(a) the individual is an individual to whom paragraph 7 of Schedule 36 to FA 2004 applies (primary protection),

(b) the individual is not within paragraph 24(1) of Schedule 36 to FA 2004 (persons with lump sum protection),

(c) the appropriate percentage is 25%, and

(d) 25% of the individual’s lifetime allowance previously-used amount is greater than £375,000,

sub-paragraph (3) has effect as if the amount determined under paragraph (b) of that sub-paragraph were £375,000.]

(4) In [F5 sub-paragraphs (3) and (3A)] “the appropriate percentage” means—

(a) 100% in a case in which—

(i) the individual becomes entitled to a serious ill-health lump sum before 6 April 2024 and is under the age of 75 at the time of the payment, or

(ii) the individual dies before 6 April 2024 under the age of 75 and [F6 the conditions in sub-paragraph (4A) are met];

(b) 25% in any other case.

[F7 (4A) The conditions mentioned in sub-paragraph (4)(a)(ii) are—

(a) that before 6 April 2024 a person is paid a defined benefits lump sum death benefit, or an uncrystallised funds lump sum death benefit, in respect of the individual,

(b) that the lump sum is paid before the end of the period of two years beginning with the day on which the scheme administrator of the scheme first knew of the individual’s death or (if earlier) the day on which the scheme administrator could first reasonably have been expected to have known of it, and

(c) that the person to whom the lump sum is paid is not a non-qualifying person.]

(5) But sub-paragraphs (2) to [F8 (4A)] do not apply if, [F9 at the relevant time], a transitional tax-free amount certificate is in force in relation to the individual.

(6) In such a case, the amount of the individual’s lump sum and death benefit allowance that is available on the occurrence of the relevant benefit crystallisation event is—

(a) the amount of that allowance that is available in accordance with section 637S of ITEPA 2003 on the occurrence of that event, less

(b) the individual’s lump sum and death benefit transitional tax-free amount;

or, if that produces a negative result, nil.

[F10 (6A) In sub-paragraph (5) “the relevant time” means—

(a) if the relevant benefit crystallisation event is the individual becoming entitled to a relevant lump sum (within the meaning of section 637S of ITEPA 2003), the time at which the individual becomes so entitled;

(b) if the relevant benefit crystallisation event is a person being paid a relevant lump sum death benefit (within the meaning of section 637S of ITEPA 2003), the 31 October next following the end of the tax year in which the relevant lump sum death benefit is paid.]

(7) For provision about the meaning of expressions used in this paragraph, see paragraph 129.

Textual Amendments

F1 Word in Sch. 9 para. 126(1)(a) omitted (with effect in accordance with reg. 1(3) of the amending S.I.) by virtue of The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 4(9)(a)

F2 Word in Sch. 9 para. 126(1)(b) inserted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 4(9)(b)

F3 Sch. 9 para. 126(1)(c) inserted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 4(9)(c)

F4 Sch. 9 para. 126(3A) inserted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 4(10)

F5 Words in Sch. 9 para. 126(4) substituted (with effect in accordance with reg. 1(3) of the amending S.I.) by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (S.I. 2024/356), reg. 4(11)

F6 Words in Sch. 9 para. 126(4)(a)(ii) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 17(2)(a)

F7 Sch. 9 para. 126(4A) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 17(2)(b)

F8 Word in Sch. 9 para. 126(5) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 17(2)(c)(i)

F9 Words in Sch. 9 para. 126(5) substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 17(2)(c)(ii)

F10 Sch. 9 para. 126(6A) inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 17(2)(d)