Tax on your private pension contributions

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Lifetime allowance

The current lifetime allowance is £1,073,100.

The rate of the tax you pay on pension savings above the lifetime allowance depends on how the money is paid to you and when you took your pension savings.

If you took your pension before 6 April 2023, the rate is:

  • 55% if you get it as a lump sum
  • 25% if you get it any other way, for example pension payments or cash withdrawals

If you took your pension on or after 6 April 2023, there is no lifetime allowance charge. This applies if you took it as a lump sum or any other way, for example pension payments or cash withdrawals. Instead you’ll pay Income Tax on some or all of the lump sum. Your pension provider will take off the charge before you get your payment.

You might be able to protect your pension pot from reductions to the lifetime allowance.

Check how much lifetime allowance you’ve used

Ask your pension provider how much of your lifetime allowance you’ve used.

If you’re in more than one pension scheme, you must add up what you’ve used in all pension schemes you belong to.

What counts towards your allowance

It depends on the type of pension pot you get.

If you get a defined contribution, what counts is the money in pension pots that goes towards paying you, however you decide to take it.

If you get a defined benefit, what counts is usually 20 times the pension you get in the first year plus your lump sum - check with your pension provider.

Your pension provider may ask for information about other pension schemes you’re in so they can check if you’re above your lifetime allowance, and how much tax-free lump sum you can get when you:

  • decide to take money from a pension pot
  • turn 75
  • transfer your pension overseas

Pay tax if you go above your lifetime allowance

You’ll get a statement from your pension provider telling you how much tax you owe if you go above your lifetime allowance. Your pension provider will deduct the tax before you start getting your pension.

You’ll need to report the tax deducted by filling in a Self Assessment tax return - download and fill in form SA101 if you’re using paper forms. You’ll get information from your pension provider to help you do this.

If you took your pension on or after 6 April 2023, there is no lifetime allowance tax charge and you do not need to report the tax deducted on your Self Assessment tax return.

If you die before taking your pension the pension provider will take tax from the person who inherits your pension.

Protect your lifetime allowance

The lifetime allowance was reduced in April 2016. You can apply to protect your lifetime allowance from this reduction.

If you hold lifetime allowance protection, this may increase the amount of tax-free lump sum you can take from your pensions.

Tell your pension provider the type of protection and the protection reference number when you decide to take money from your pension pot.

Withdrawing cash from a pension pot

You cannot withdraw cash from a defined contribution pension pot (‘uncrystallised funds pension lump sums’) if you have:

  • primary or enhanced protection covering a lump sum worth more than £375,000
  • ‘lifetime allowance enhancement factor’ if your unused lifetime allowance is less than 25% of the cash you want to withdraw

Find out more about how you can take your pension.

Reporting changes to HMRC

You can lose Enhanced protection or any type of Fixed protection if you do not meet certain conditions.

The conditions for losing your lifetime allowance protection depend on when HMRC received your application.

Tell HMRC in writing if you think you might have lost your protection.

If you have the right to take your pension before 50

You may have a reduced lifetime allowance if you have the right to take your pension before you’re 50 under a pension scheme you joined before 2006.

This only applies to people in certain jobs (for example professional sports, dance and modelling) who start taking their pension before they’re 55.

Your lifetime allowance is not reduced if you’re in a pension scheme for uniformed services, for example the armed forces, police and fire services.