Finance (No.2) Act 2023 receives Royal Assent

The Finance Bill that followed this year’s Budget is now enacted and sets out the pensions tax changes announced to take effect from April 6, 2023.

The Finance (No.2) Act 2023 contains, in sections 18-23, legislation to implement changes to the pensions tax regime. They are: 

• Abolition of the LTA charge. Any lump sums that exceed the member’s remaining LTA are treated as pension income and taxed accordingly.
• The Annual Allowance has been raised from £40,000 pa to £60,000 pa, the MPAA from £4,000 pa to £10,000 pa and the adjusted income level for the tapered annual allowance from £240,000 pa to £260,000 pa.
• Anyone who applied for or held any of Enhanced Protection or the Fixed Protections from 2012, 2014 or 2016, before Budget Day on March 15, 2023, is protected from losing them if they contribute to, join, or transfer to, a pension scheme on or after April 6, 2023. 
• There are also new limitations on the tax-free lump sum (PCLS) for those with Enhanced Protection with Lump Sum Protection, and on the tax-free element of the stand-alone lump sum.

The next phase of the Government’s changes is for the LTA itself to be abolished. Details are expected once the relevant clauses in next year’s Finance Bill are published.