← Learn/Pensions · Lump sum allowances
Part of the Lump sum allowances guide →
The Lump Sum Allowance: how £268,275 actually gets consumed
Since April 2024 tax-free cash has a lifetime ceiling of its own. The arithmetic is simple; the consumption rules and the transitional deductions are where files go wrong.
Based on HMRC’s Pensions Tax Manual (PTM171000, PTM174100, PTM176100) and Finance Act 2024 Schedule 9.
5 min read · Last reviewed
— In short
The Lump Sum Allowance caps the tax-free cash a member can take across their lifetime at £268,275 as standard. Every pension commencement lump sum consumes it pound for pound, as does the tax-free element of an UFPLS; income such as drawdown, annuity purchase and scheme pension leaves it untouched. Any excess is paid but taxed as pension income at the member's marginal rate, and protection or a pre-2024 transitional deduction moves the opening ceiling.
Put the rule to work
Run the calculation
Use the Lump Sum Allowance (LSA) calculator with your figures and see the working. Free, with no sign-up required.
The Lifetime Allowance was abolished from 6 April 2024 and replaced by two lump-sum ceilings. The Lump Sum Allowance caps the tax-free cash a member can draw across their lifetime: £268,275 as standard — 25% of the final £1,073,100 LTA, frozen at that figure. Every pension commencement lump sum consumes it pound for pound, as does the tax-free element of an UFPLS. Income never consumes it: drawdown, annuity purchase and scheme pension leave the LSA untouched, which is the structural difference from the old regime.
A worked excess
Take a client with no protection who's drawn £100,000 of tax-free cash since April 2024 and now crystallises enough to support a £200,000 PCLS.
- Standard LSA
- £268,275
- Used to date
- £100,000
- Remaining
- £168,275
- PCLS requested
- £200,000
- Paid tax-free (capped at remaining)
- £168,275
- Excess — taxed at marginal rate
- £31,725
The lump sum, and what's already used.
Example inputs — replace these with your figures.
The pension commencement lump sum (PCLS) the member intends to take. This tests the allowance only — the separate 25% permitted maximum on the crystallisation is not tested here.
Lump sum allowance (LSA) used before this event — post-April-2024 PCLS/UFPLS tax-free amounts plus the transitional deduction for any pre-6-April-2024 crystallisations (run the TTFAC calculator first and enter the figure it gives). This quick check assumes no separate LSDBA use (e.g. a serious ill-health lump sum) — if there is any, the LSDBA may be the binding cap: use the full workflow.
Fixed protection sets the allowance outright — FP2012 £450,000, FP2014 £375,000, FP2016 £312,500. Individual protection needs the certificate's protected LTA: IP2014 runs £1.25m–£1.5m, IP2016 £1m–£1.25m. Enhanced and Primary Protection need member-specific certificate factors — use the full workflow.
The LSA framework applies from 2024/25 — earlier years used the LTA regime. The standard LSA is £268,275 in every year listed, so the year you pick sets the audit stamp rather than the allowance.
The excess isn't refused — it's paid, and taxed as the member's pension income at their marginal rate in the year of payment. There's no 55% charge anywhere in the new framework; for an additional-rate taxpayer the excess costs 45%, for a basic-rate taxpayer 20%. So sequencing a crystallisation into a low-income year is worth real money in a way it wasn't under the flat LTA charges.
PTM171000 · FA 2024 Sch 9 — figures engine-computed against the 2026/27 config
Protection changes the ceiling, not the mechanics
Fixed Protection 2016 holds the LSA at £312,500. Individual Protection 2014 and 2016 set it to 25% of the member's protected LTA (capped at £1.5m and £1.25m respectively). Enhanced and Primary Protection carry member-specific factors from the certificate. The consumption arithmetic is identical in every case — only the opening ceiling moves.
The common error: the missing transitional deduction
Files go wrong at the opening balance, not the arithmetic. A member who crystallised benefits before April 2024 doesn't start with a clean £268,275: the default transitional rule deducts 25% of the LTA percentage they used — and that default assumes maximum tax-free cash was taken, which is frequently false. Before relying on the default, test whether a Transitional Tax-Free Amount Certificate recovers headroom — that is the subject of the TTFAC article. For a quick position check on your own figures, the LSA calculator runs the same engine shown here.
PTM176100 (protections) · PTM174100 (transitional deductions)
Sources & grounding
Allowance values (£268,275 standard LSA; FP2016 £312,500; IP2014 25% of protected LTA capped £1.5m; IP2016 capped £1.25m): calc-engine versioned configs (2026-27.json lsaAmount/protections) per FA 2024 Sch 9 / PTM171000 / PTM174700 (FP2016) / PTM176510 (IP2014 / IP2016).
Worked figures (used £100,000 → remaining £168,275 → £200,000 PCLS → excess £31,725): computed through the production engine (calculateLSA — the same render-time computation shown on /calculators/lump-sum-allowance).
Marginal-rate treatment of the excess: the 55%/25% lifetime allowance charges were removed from 6 April 2023 (Finance (No. 2) Act 2023 s.18; s.19 taxed the relevant lump sums at marginal rate from that date) and the allowance itself was abolished from 6 April 2024 (FA 2024 Sch 9). Note for anyone following the citation through: BOTH of those 2023 sections were themselves expressly repealed on 22 February 2024 by FA 2024 s.14(3), as “superseded by the amendments contained in Parts 1 and 2 of Schedule 9” — the 6 April 2023 effect stands, but the sections now read as repealed on legislation.gov.uk. Repeal status added 2026-08-07; verified against legislation.gov.uk F(No.2)A 2023 s.18 and FA 2024 s.14. PTM171000.
Primary sources:PTM171000
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.
Next
Put this to work on a real case.
Open the Lump Sum Allowance (LSA) calculator with the worked example above already filled in. Lump Sum Allowance (LSA) calculator
A free account saves the calculation to a client record and renders the branded compliance annex PDF — 3 a month, no card.
Create free account