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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.
5 min read · Last reviewed
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
A member with no protection has taken £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 excess is not refused — it is paid and taxed as the member's pension income at their marginal rate in the year of payment. There is no 55% charge anywhere in the new framework; for an additional-rate taxpayer the excess costs 45%, for a basic-rate taxpayer 20%. Sequencing a crystallisation into a low-income year is therefore worth real money in a way it was not 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 does not 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.
PTM176000 (protections) · PTM174000 (transitional deductions)
Grounding & sources
- 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 / PTM176000.
- 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 (replacing the 55%/25% LTA charges): FA 2024 Sch 9; PTM171000.
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.