PENSION ALLOWANCES

Tax Year: 2023/2024  2022/2023 
Standard Annual Allowance:  £60,000 £40,000
Money Purchase Annual Allowance:  £10,000 £4,000
Tapered Annual Allowance: Tapered annual allowance applies to those with ‘adjusted income’ of more than £260,000 and ‘threshold income’ of more than £200,000. Tapered annual allowance applies to those with ‘adjusted income’ of more than £240,000 and ‘threshold income’ of more than £200,000
Tax-Free Cash:

£268,275

 

£268,275

 


Glossary

Standard Annual Allowance

Standard Annual Allowance

The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that your clients can build up in a defined benefit pension scheme each year, for tax relief purposes.

Money Purchase Annual Allowance

Money Purchase Annual Allowance

If your clients have flexibly accessed their benefits, the Money Purchase Annual Allowance (MPAA) is the amount that can be paid in one year to their money purchase arrangements without a tax charge applying.

Tapered Annual Allowance

Tapered Annual Allowance

For the taper to apply, the limits on threshold income and adjusted income must both be exceeded. This reduces your clients’ Annual Allowance by £1 for every £2 of adjusted income above £260,000 subject to a maximum reduction of £50,000. The minimum reduced allowance is £10,000. The level of adjusted income at which the maximum reduction in the annual allowance is reached is £360,000.

Tax-Free Cash

Tax-Free Cash

Tax-free cash is limited to the lower of 25% of total benefits or 25% of the current lifetime allowance of £1,073,100. This means a maximum tax-free cash amount of £268,275 can be received by pension savers during their lifetime.