Wealth Planning -

Budget 2023: Four financial planning takeaways

The March 2023 budget had some important updates for pension savers. Here is a quick round-up of our top four takeaways.


16th March 2023


Chris Allen


1. Pension Lifetime Allowance (LTA) to be abolished

Currently, there is a limit on how much you can accumulate in a pension over your lifetime before tax may be due. This is known as the lifetime allowance (LTA) and is set at £1,073,100. We expected this limit to increase, however, it was a surprise for it to be abolished entirely. From the 2023/2024 tax year, there will be no LTA tax charge, and from 2024/2025 this change will be written into legislation. Previously, where the LTA was not exceeded, you could draw a tax-free lump sum of 25% of the value of your pension. This tax-free lump sum will remain unchanged at the current level of £268,275, and where individuals have transitional protections (allowing them to benefit from a higher tax-free lump sum), they can retain this benefit.


2. Annual Allowance increasing by £20,000 to £60,000

The maximum amount that you can typically contribute to a pension each tax year will increase from £40,000 to £60,000. This change will come into effect from 6 April 2023. Also, the tapered Annual Allowance is increasing from £4,000 to a minimum of £10,000. For high income individuals, the threshold of when the annual allowance starts to reduce will be increasing from £240,000 to £260,000 from the 2023/2024 tax year. For every £2 of adjusted income over £260,000, the individual will lose £1 of their Annual Allowance, dropping to a minimum of £10,000.


3. Money Purchase Annual Allowance (MPAA) increasing to £10,000

Once an individual starts drawing down from a defined contribution pension, the MPAA is applicable. Previously, you could only contribute £4,000 into a pension each tax year. This is now increasing to £10,000 from the 2023/2024 tax year.


4. Savings and ISA allowances frozen

The ISA allowance will remain at £20,000 and the Junior ISA allowance is also unchanged at £9,000. It is important to ensure that with pension allowances increasing, that you are maximising the benefits available to you. Pensions and allowances are a complex area of financial planning, so it is important you seek specialist advice.


To find out more about these changes, do reach out to your Arbuthnot Latham wealth planner or find out more about becoming a client.


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Becoming a client

Take control of your finances today by completing our enquiry form. Alternatively, you can call us on the number below and one of our team will be more than happy to talk about your future.

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Author -

Chris Allen

Chris Allen

Director, Wealth Planning

Chris Allen is a Chartered Financial Planner and has been with Arbuthnot Latham for nine years. He has 13 years' experience and specialises in full holistic financial planning, advising individual and corporate clients.


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