Tax Allowances
The question
To ask the Chancellor of the Exchequer, what assessment she has made as to the potential merits of Transitional Tax-Free Amount Certificates.
Answered by Torsten Bell
A Transitional Tax-Free Amount Certificate (TTFAC) is an official document issued by a pension scheme provider or insurer. It confirms the actual amount of tax-free lump sums an individual received before 6 April 2024, when the Lifetime Allowance was abolished.
Since the Lifetime Allowance was abolished, a standard calculation is used to establish an individual’s remaining tax-free allowances, unless an application for a TTFAC has been made. The standard calculation assumes that 25% of all benefits taken before April 2024 were tax-free.
This assumption can disadvantage individuals who:
• Took less than 25% tax-free cash,
• Waived their tax-free lump sum entitlement, or
• Had complex arrangements or protections.
The TTFAC allows individuals who are disadvantaged by the standard calculation to evidence the actual tax-free amount they took, potentially increasing their remaining tax-free allowances to better reflect the position they were in prior to the abolition of the Lifetime Allowance.
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