An application for a Transitional Tax-free Amount Certificate (TTFAC) can only be made once. If you apply, it must be before your first relevant benefit crystallisation event (RBCE) which occurs after 6 April 2024.
The Lifetime Allowance (LTA) was removed from 6 April 2024. New rules apply about how much tax-free lump sum you can take from your pension.
The amount of LTA used affects your new Lump Sum Allowance (LSA). The LSA is the maximum tax-free amount you can take going forward.
Example of how LTA used affects your LSA:
If you used 50% of the LTA on drawing retirement benefits before 6 April 2024, your new LSA is reduced by £134,137.50 (50% x £1,073,100 x 25%).
If you took pension benefits before 6 April 2024, the government assumes you used 25% of those benefits as tax-free cash. This is unless you have a Transitional Tax-Free Amount Certificate.
A Transitional Tax-free Amount Certificate shows exactly how much tax-free cash you received before 6 April 2024. You may want to apply for one if you took less than 25% tax-free cash from your pension(s) before that date.
Transitional Tax-free Amount Certificate (TTFAC)
A TTFAC accurately reflects the relevant tax-free lump sums paid to an individual before 6 April 2024.
You can apply for a TTFAC. You may wish to do this if you elected to receive a lump sum of less than 25% of the benefits taken before 6 April 2024. Members may not always be better off with a TTFAC. You should seek independent financial advice if you are not sure whether to apply for one. Once issued, the TTFAC must be used.
Members can apply to any pension scheme they are a member of for a TTFAC. HMRC has stated individuals may wish to apply to the scheme from which they took the majority of their pension before 6 April 2024. Alternatively, they may wish to apply to the scheme paying the first RBCE after 6th April 2024.
The application must include proof of the total tax-free lump sums previously received. This means written confirmation from the previous scheme administrators.
If the pension scheme is satisfied with the evidence, they must issue a TTFAC. They must certify that they are satisfied with your transitional tax-free amounts.
These amounts are deducted from the standard Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA). This is instead of deducting 25% of the previously used LTA amount.