The Inheritance Tax (IHT) threshold and Residence Nil Rate Band (RNRB) will remain at £325,000 and £175,000 respectively until April 2028. This means that qualifying estates will still be able to pass on up to £500,000 and the qualifying estates of a surviving spouse or civil partner can pass on up to £1m without incurring any IHT liabilities.

Please contact us if you would like to know more or go to https://www.gov.uk/guidance/check-if-you-can-get-an-additional-inheritance-tax-threshold.

The CGT annual exemption was cut from £12,300 to £6,000 with effect from 6^th April 2023, and will reduce further to £3,000 from 6^th April 2024. Consequently, based on 2021/22 figures, it is expected that an estimated extra 235,000 individuals will need to file a self-assessment return in 2023/24.

The Lifetime Allowance (LTA) is the total amount that you can hold in tax-favoured pension funds without incurring a tax charge. The standard LTA is currently £1,073,100.

An LTA test is applied every time you access your pensions or on your 75th birthday (whether you are taking any benefits or not). You only pay a tax charge on the amount by which you exceed the standard LTA not on the entire pension fund. Until 6^th April 2023 the LTA charge was a fixed percentage of the excess. This fixed percentage has now been removed by the government. You’ll now only pay tax on any excess over your lifetime allowance as earned income under PAYE rules.

For the 2023/24 tax year, the mechanics of the LTA will still apply, but no LTA charge will apply for benefits taken over the available LTA. The LTA itself is planned to be abolished from 6^th April 2024. Further details can be found at: https://www.gov.uk/government/publications/abolishing-the-pensions-lifetime-allowance/abolition-of-the-lifetime-allowance.

• From 6^th April 2023 onwards, you can withdraw 25% of the value your uncrystallised pension funds as tax-free cash up to a maximum £268,275 (25% of the current £1.073m LTA). The Government has confirmed that this cap will remain and frozen at this level. Those individuals with rights to a tax-free cash greater than 25% will continue to keep this entitlement. Also, whilst the various forms of LTA protection will be redundant with regards to the LTA charge, they may still be relevant for determining the amount of tax-free cash due.
• Usually the maximum that you, employer or third party can contribute to a pension scheme each tax year is restricted to the higher of £3,600 or 100% of your relevant UK earnings (investment income, property rental income and dividends are not classed as relevant UK earnings) up to a gross limit of £40,000 – this limit is known as the annual allowance. You can pay more than the annual allowance, but you could be taxed on the excess at your marginal rate of tax. From 6^th April 2023, the annual allowance has increased to £60,000 gross per tax year.
• For individuals who have drawn any taxable income from their defined contribution pensions (i.e., not final salary pensions) using flexible retirement options, the maximum amount that could be paid in each year was £4,000 gross. This has increased to £10,000 gross per annum from 6^th April 2023.

The LISA was introduced in the March 2016 Budget and is available for those aged between 18 and 39. The LISA’s most eye-catching feature is a 25% government bonus. Savers can put in up to £4,000 a year of their overall ISA allowance (£20,000 per person per tax year) and receive a bonus of up to £1,000 every year. The £1,000 bonus does not count as part of your £20,000 ISA allowance. The LISA funds must be used to buy your first home (worth up to £450,000) or locked away as a retirement fund until you are 60.

The remainder of your ISA allowance (e.g., £16,000) can still be split between a Cash ISA and/or Stocks & Shares ISA.

Although a LISA isn’t exclusively a means to accumulate additional retirement fund or a direct competitor to saving in a pension, there could be some short-term advantages of saving in a LISA for retirement such as access to the money in the case of an emergency. However, like all financial decisions, care should be taken when considering the suitability of a LISA and its role with your overall financial portfolio.

The ways in which you can access your pension fund(s) have changed since 6^th April 2015. For more information please contact us or for general guidance contact the Government-backed Pensions Wise service.

Generally, the minimum age you can take your pension benefits (known as crystallising) is age 55. A brief summary of the ways in which you can draw your benefits are noted below.

• Take a proportion of your pension fund (normally up to 25%) as a tax-free cash sum and either
• Using your remaining funds to buy an annuity which will then pay you a regular taxable income, or
• Draw a proportion of your remaining funds each year as taxable income whilst still having the funds invested, or
• Taking the whole fund as cash in one go

Whilst you are not obliged to purchase an annuity they are still available if you wish to have a secure pension income for your lifetime.

Individuals with a medical condition, are in poor health, smoke or overweight, may be able to get a significantly higher income by purchasing an ‘enhanced annuity’.

Individuals considering this option should think about whether to provide an income for a partner or another dependant on death and therefore whether to purchase a single or a joint life annuity. ‘Level’ annuities provide a higher income to start with than annuities that increase but the payments will then stay the same for life. This means that the real value of the annuity income may reduce over time due to inflation. The costs of providing such benefits (and any other ancillary options) will reduce the income payable.

Since 6^th April 2015, new flexible annuities have become available whereby the income level can decrease as well as increase provided it is stated in the contract when you start the annuity.

You do not have to take any annuity or other pension that is offered and different providers might pay a higher income so it’s important to shop around for the best deals.

Flexi-access drawdown enables you to keep your pension benefits invested and take an income each year rather than buy an annuity. If investment growth is achieved on the invested funds, together with the fact that annuity rates increase with age, a higher pension may ultimately be purchased than could have been secured at outset via an annuity.

You can take 25% of your fund as tax-free cash(up to a maximum of £268,275). The balance of your pension fund would be earmarked to provide an income, subject to income tax at your marginal rate, as and when you want it.

There are no limits on the amount of income that you can withdraw.As soon as any income payments are taken under flexi-access drawdown then your annual allowance will reduce to £10,000 gross per tax year.

This facility allows you to take a one-off payment from your pension (excluding those funds already in flexi-access drawdown) or take a series of lump sum payments whilst keeping the remainder invested. The first 25% of the lump sum payment is tax-free with the remainder being subject to income tax at your marginal rate e.g., if you withdrew £10,000 the first £2,500 would be tax-free the remaining £7,500 being taxed.

As the name suggests, the UFPLS must be payable from your uncrystallised pension funds (i.e., the pension funds that you have not drawn any benefits from). Once the uncrystallised funds have been exhausted (e.g., by drawing ad-hoc tax-free cash sums) any future income payments may need to be restructured.

It is also important to note that as soon as you take the first UFPLS payment, your annual allowance with reduce to £10,000 gross per tax year. You will also lose the right to carry forward any unused annual allowances from earlier tax years.

Firstly, individuals considering this option should think about how to use the money to provide an income throughout retirement.

There are tax implications if you decided to withdraw the whole pension fund as cash in one go. The first 25% is tax-free with the remainder being subject to income tax at your marginal rate. You need to consider your own personal tax circumstances and the impact of taking a taxable lump sum on the tax you pay – including the possibility that you may have to pay a higher rate of tax.

If the value of the pension pot you cash in is £10,000 or more, once you have taken the cash, the annual allowance will reduce to £10,000 gross per tax year. Again, you would not be able to carry forward any unused annual allowances from earlier tax years.