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The LSDBA: the £1,073,100 ceiling that bites on death before 75
PCLS consumes it quietly alongside the LSA. The cases that surprise are serious ill-health and death before 75 — where the whole lump sum counts.
Based on HMRC’s Pensions Tax Manual (PTM172000, PTM173000, PTM174200, PTM176100) and Finance Act 2024 Schedule 9.
5 min read · Last reviewed
— In short
The Lump Sum and Death Benefit Allowance caps the total tax-free lump sums payable for a member across lifetime and death combined, £1,073,100 as standard. Every PCLS consumes it alongside the LSA, while serious ill-health lump sums and tax-free death benefits consume it alone, but only where the triggering event occurs before age 75. Death at or after 75 falls outside the test entirely and is taxed as the recipient's income; any pre-75 excess is taxed on the beneficiary at their marginal rate.
Put the rule to work
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The Lump Sum and Death Benefit Allowance caps the total tax-free lump sums payable in respect of a member across lifetime and death combined — £1,073,100 as standard. It is the second of the two post-LTA ceilings, and every PCLS consumes it alongside the LSA. Two events consume the LSDBA alone: serious ill-health lump sums and tax-free death benefits. Both only where the triggering event occurs before age 75.
A worked death-benefit excess
A member dies at 68 with an uncrystallised £1.2m fund, nominated entirely to one adult beneficiary as a lump sum, no protection, nothing previously used.
- Standard LSDBA
- £1,073,100
- Paid tax-free (capped at remaining)
- £1,073,100
- Excess
- £126,900
- Tax on the excess — beneficiary’s marginal rate
- £51,436.50
- Effective rate on the excess
- 40.5%
The excess is taxed as the beneficiary's income at their marginal rate — £126,900 stacked on £30,000 of other income spans the basic and higher bands. Before 6 April 2023 this would have been a flat 55% lifetime allowance charge on the excess. Note the two-stage repeal: the 55% / 25% charges went first, from 6 April 2023 (Finance (No. 2) Act 2023 s.18, with s.19 moving the relevant lump sums to marginal rate — both sections since repealed by FA 2024 s.14(3) as superseded, though their 2023 effect stands), and the allowance itself was abolished a year later, from 6 April 2024 — so a death in 2023/24 already fell outside the 55% charge even though the lifetime allowance still existed. Marginal-rate treatment is usually better, and because it follows the recipient, splitting the lump sum across several beneficiaries or paying it as beneficiary drawdown changes the bill.
PTM172000 · PTM173000 · FA 2024 Sch 9 — figures engine-computed against the 2026/27 config
The 75 boundary
Death at or after 75 takes the death benefit outside the allowance test entirely — it's taxable income in the recipient's hands, however large. Serious ill-health lump sums work the same way: allowance-tested before 75, taxable income after. PCLS and UFPLS, by contrast, keep consuming the allowances at any age. The LSDBA is therefore a pre-75 ceiling. A fund likely to exceed it is a reason to revisit nomination shape — lump sum vs beneficiary drawdown — while the member is alive.
The common error
Treating “tax-free death benefit before 75” as unconditional. That was close to true under the LTA for modest funds. Under the LSDBA a seven-figure uncrystallised fund paid as a lump sum will breach the ceiling, and prior lifetime crystallisations erode it further — as does pre-2024 history via the transitional rules, where the LSDBA default for pre-75 SIH and death events is 100%, not 25%. Check the position on the LSDBA calculator before assuming the headline.
PTM174200 (transitional LSDBA defaults) · post-75 events: taxable income, no allowance test
Sources & grounding
Allowance value (£1,073,100 standard LSDBA; FP2016 £1,250,000; IP = protected LTA): calc-engine versioned configs per FA 2024 Sch 9 / PTM172000 / PTM174700 (FP2016) / PTM174600 (IP2014 / IP2016).
Worked figures (death pre-75, £1,200,000 lump sum, nothing used → excess £126,900; tax £51,436.50 at 40.53% effective on a beneficiary with £30,000 income): computed through the production engine (calculateCrystallisation, scripts/ground-phase-c.mts, 2026-06-10; same engine as /calculators/lsdba).
Pre/post-75 boundary (post-75 SIH and death benefits are taxable income, not allowance-tested; PCLS/UFPLS keep consuming post-75): PTM173000; engine ADR-024.
Primary sources:PTM173000
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.
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