Yesterday's UK Budget announcement certainly gave us a lot to consider, with the abolishment of the Lifetime Allowance being the headliner.
As the dust begins to settle on the UK Spring Budget, the big headline for investors was the abolishment of the Pensions Lifetime Allowance. For many UK expatriates, this news could present new planning opportunities.
Pension Lifetime Allowance Abolished
In possibly the biggest change to the pensions system since the reforms of 2015, Chancellor Jeremy Hunt announced plans to abolish the Lifetime Allowance (LTA) from 6th April 2023. The LTA, which currently stands at £1.07m is the maximum amount of tax-free pension savings an individual can accrue over their lifetime. Once the value of the pension exceeds the LTA, any excess above the LTA is subject to a tax charge of up to 55%.
Although not announced at the dispatch box, the Pension Commencement Lump Sum (the maximum amount you can withdraw from your pension free of tax) will remain frozen at £268,275 (25% of the current LTA).
Importance of Holistic Planning
While the headlines certainly sound positive for UK pensions, Shadow Chancellor Rachel Reeves has already said if Labour were to win the next General Election, they would overturn the abolishment of the LTA. And with the allowance changing numerous times over the last decade, this should perhaps be seen as a pertinent reminder of the importance of taking a holistic approach to financial planning and ensuring you are able to take advantage of all relevant HMRC endorsed schemes available to you to mitigate your tax liability.
Expat Investor Podcast – Budget Special
In the next episode of the Expat Investor Podcast, Head of Global Partner Tom Pewtress will be discussing the fallout from the Budget in more detail and covering any aspects that could impact international workers.
If you have any questions about what this might mean for you, please contact us via the form below.