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Abolishing The Lifetime Allowance – How Your Company Life Insurance Might Be Impacted
Abolishing The Lifetime Allowance – How Your Company Life Insurance Might Be Impacted
The government recently announced their intention to scrap the lifetime allowance (LTA) tax charge on pensions.
But our sister company, Towergate Health & Protection, advise that this tax change also affects group life assurance (GLA) policies.
As the previous LTA tax rules applied to GLA policies, family members sometimes faced unexpected tax burdens after receiving a life assurance payout.
What’s changed?
There’s still an LTA tax charge for the 2023/2024 tax year, but it’s changed.
Rather than a fixed 55% tax charge for any life assurance benefit above the LTA figure, this year the amount above the LTA figure will be treated as pension income and taxed at the beneficiary’s marginal rate of income tax.
For the 2024/25 tax year, the LTA tax may be scrapped altogether, though this isn’t set in stone. But what we do know is that as of today there’s still a potential tax burden for employees with pension and life assurance benefits above the LTA.
But we can help. Our sister company, Towergate Health & Protection, can devise a tailored solution for your cover to ensure it’s as tax efficient as possible.
If you’d like to know how we can help your cover to be more tax efficient, speak to your usual advisor.
