UK Lump Sum Allowance (LSA) Calculator
The Lifetime Allowance is gone — abolished April 2024. The new Lump Sum Allowance (£268,275) and Lump Sum & Death Benefit Allowance (£1,073,100) cap tax-free cash and death benefits, but total pension savings are now unlimited. Work out your tax-free lump sum, remaining LSA headroom, and what happens above the cap.
The LTA is gone. What replaced it?
From 6 April 2024, the £1,073,100 Lifetime Allowance and its 25%/55% charge on excess pot value disappeared. In its place, HMRC introduced two more targeted allowances that only bite when you actually take money out:
| Allowance | Amount | What it caps |
|---|---|---|
| LSA (Lump Sum Allowance) | £268,275 | Tax-free lump sums in your lifetime |
| LSDBA (Lump Sum & Death Benefit Allowance) | £1,073,100 | Total lump sum death benefits (pre-75) |
Crucially, the size of your total pension pot is no longer capped. You can save £3 million into pensions — as long as you take the excess as taxable income (drawdown or annuity), no special charge applies. The LTA charge is entirely gone.
How the LSA gets used
Every time you crystallise a pension and take tax-free cash, the amount taken counts against your £268,275 (or protected) LSA. So if you take £100,000 tax-free from a pot at age 55, you have £168,275 of LSA remaining. Take another £100,000 at age 60 — £68,275 remaining. At £268,275 total, you're capped.
Anything above the LSA that you take as a lump sum becomes a Pension Commencement Excess Lump Sum (PCELS), fully taxed at your marginal income tax rate. So on a £1.5m pot, the headline "25%" is £375,000 but only £268,275 arrives tax-free; the remaining £106,725 is taxed at 40–45% — turning it into £58k–£64k net. Most people leave it in for drawdown instead.
Protection: your LSA may be higher
If you registered for LTA protection before it was abolished, that protection carries into the new regime. Your personal LSA is 25% of your protected LTA. So:
| Protection | Protected LTA | Your LSA |
|---|---|---|
| None | £1,073,100 | £268,275 |
| Fixed Protection 2016 | £1,250,000 | £312,500 |
| Fixed Protection 2014 | £1,500,000 | £375,000 |
| Fixed / Primary Protection 2012 | £1,800,000 | £450,000 |
Enhanced Protection and Individual Protection cases have bespoke rules — always confirm your certificate value with your SIPP provider or scheme administrator before crystallising.
Two counterintuitive planning moves
1. Don't automatically take the full 25%
Under the old LTA, "take the 25% while you can" made sense because the pot was capped. Under LSA, the pot isn't — so deferring lump sums lets the pension continue growing tax-free. Every extra year inside the wrapper compounds untaxed. Only take tax-free cash when you actually have a use for it.
2. Pensions are now the best IHT wrapper
Since the LTA charge is gone, DC pensions are outside your estate for Inheritance Tax and pass free of IHT (and free of income tax if you die before 75). This makes deliberately not drawing from your pension — while spending down ISAs and GIA first — the most efficient inheritance strategy for higher-net-worth estates. The 2024 Budget kept this treatment untouched.
Uses 2024/25 UK pension rules (LTA abolished, LSA / LSDBA introduced by Finance Act 2024). Not tax or investment advice — LTA protections and edge cases (pre-2006 pensions, US-tax-treaty cases, DB scheme-specific rules) need a regulated pension adviser. Always confirm your protection certificate before crystallising.
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Frequently asked questions
What is the Lump Sum Allowance and why does it exist?
From 6 April 2024, the Lifetime Allowance (LTA) was abolished and replaced by two new allowances: the Lump Sum Allowance (LSA) of £268,275, and the Lump Sum & Death Benefit Allowance (LSDBA) of £1,073,100. The LSA caps the total tax-free cash you can take from all UK pensions in your lifetime. The LSDBA caps the total tax-free lump sum death benefits your beneficiaries can receive. If you don't need lump sums, you can still put unlimited pension savings — the old LTA charge on pot size is gone.
How much tax-free cash can I take?
Up to 25% of each pension pot you crystallise, subject to the £268,275 LSA cap across all your pensions combined. So a £500,000 pot lets you take £125,000 tax-free (25%), well inside the LSA. A £1.2 million pot would let you take £268,275 tax-free (LSA capped, not 25%), then the remaining 25% of the pot (£31,725) is taxable at your marginal rate as a Pension Commencement Excess Lump Sum.
What if I registered for Fixed or Individual Protection?
Protections carry across. If you had LTA protection (Fixed Protection 2016 at £1.25m, or Individual Protection 2016 up to £1.25m, etc.), your LSA is set at 25% of your protected LTA — potentially higher than the standard £268,275. E.g. Fixed Protection 2016 gives an LSA of £312,500 (25% of £1,250,000). Enter your protected LTA in the calculator to see your personal LSA.
Does taking a lump sum use up my LSA even if I don't withdraw all of it?
Yes — the amount of tax-free cash you actually take reduces your remaining LSA £-for-£. Crystallising a pension without taking a lump sum uses zero LSA (only the tax-free amount you draw counts). So drawdown-only crystallisations preserve your LSA for later use.
How does the LSDBA work for death benefits?
If you die before age 75, your beneficiaries can receive lump sums totalling £1,073,100 tax-free (reduced by any LSA you already used in life). Above that, lump sum death benefits are taxed at the beneficiary's marginal rate. If you die after 75, all lump sum death benefits are taxable at the beneficiary's marginal rate regardless of the LSDBA. Drawdown pension continues to be taxable at the beneficiary's marginal rate on withdrawal in both cases.
Is 25% always the right amount to take tax-free?
No — taking the full 25% is the default advice but not always optimal. Reasons to take less: (1) you don't need the cash and it grows tax-free inside the wrapper, (2) you could crystallise less now and take more from the same LSA later, (3) any cash outside pension counts toward your estate for Inheritance Tax while pension pots don't (pre-death). Reasons to take the full 25%: paying off a mortgage, funding a large purchase, or hedging against future tax changes.
What happens to money above the LSA?
Excess taken as a lump sum is a Pension Commencement Excess Lump Sum (PCELS), taxed at your marginal income tax rate in the year of receipt. Most people avoid this by leaving the excess in the pension for drawdown or annuity purchase, where it's taxed as income at marginal rate anyway — but stays inside the tax-free-growth wrapper.
Are the LSA and LSDBA staying at these amounts?
As of the 2024 Autumn Budget, the numbers are frozen for the current parliament with no announced changes. Historical pattern with the old LTA was frequent recalibration — the LSA is realistically likely to shift with future budgets, either up (with inflation) or down (revenue raid). Model your retirement plan with realistic ranges, not just today's number.
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