Lifetime Allowance Abolished: What It Means for UK Expats

For years, the lifetime allowance was one of the main reasons expats were told to move a UK pension abroad. That reason no longer exists. The charge was removed from 6 April 2023 and the allowance itself was abolished from 6 April 2024. This guide explains what changed, what replaced it, and what it means for expats with larger UK pensions.

This guide is general information, not personal advice.

What the lifetime allowance was

The lifetime allowance capped the total pension benefits you could build without an extra tax charge. When benefits went over it, a charge of 25% or 55% could apply, depending on how you took the money. Older articles, including our previous version of this page, described these charges. They no longer apply.

What changed

• 6 April 2023: no new lifetime allowance charge applied from this date.
• 6 April 2024: the lifetime allowance was abolished.

It was replaced by allowances that work differently.

What replaced it

• Lump sum allowance. This is usually £268,275. It limits the tax-free cash you can take, including the 25% element of a withdrawal. Trivial commutation and winding-up lump sums do not reduce it, but you must have some allowance available to take them.
• Lump sum and death benefit allowance. This is usually £1,073,100, the same level as the old standard lifetime allowance. It covers lump sums paid to you or your beneficiaries, including certain death benefits.
• Overseas transfer allowance. Transfers to a QROPS are tested against an allowance equal to the lump sum and death benefit allowance. This is the £1,073,100 figure in our overseas transfer charge guide.

Holding a protected allowance can make any of these higher.

What happens if you go over

Going over the allowances no longer triggers the 25% or 55% charge. Instead:

• Amounts above the lump sum allowance are taxed as income, at your marginal rate.
• Amounts above the lump sum and death benefit allowance are taxed at the marginal rate of the person who receives them.
• Providers normally deduct the tax before payment.
• For transfers to a QROPS above the overseas transfer allowance, the overseas transfer charge applies to the excess.

Transitional rules and protections

• If you took benefits before 6 April 2024, your allowances may be reduced to reflect the lifetime allowance you had already used. The standard reduction is usually 25% of the lifetime allowance previously used. If that does not reflect your actual tax-free amounts, you may be able to apply for a transitional tax-free amount certificate.
• Existing lifetime allowance protections keep their higher tax-free entitlements.
• Applications for Fixed Protection 2016, Individual Protection 2016 and certain enhancement factors closed on 6 April 2025.

If you hold a protection, check with your provider how it now applies.

What it means for expats

The lifetime allowance is no longer a reason to move abroad. One of the arguments for a QROPS was to escape the lifetime allowance. That argument has gone. Our guide to SIPP vs QROPS explains why many expats now stay with a UK pension, and our QROPS page explains how overseas schemes work.

Moving a large pension to a QROPS is limited by the overseas transfer allowance. Above £1,073,100, the 25% charge applies even where an exclusion would otherwise apply.

Being non-resident does not change the allowances. The lump sum allowance and the lump sum and death benefit allowance apply whether you live in the UK or abroad. Our guide to taking a UK pension lump sum abroad explains how the tax-free cash works for non-residents.

You can keep paying in. With no lifetime allowance, the limit on contributions is the annual allowance, £60,000 for 2026 to 2027 for most people. See paying into a UK pension while abroad.

Inheritance tax is the next change. From 6 April 2027, most unused pension funds and death benefits count towards the estate of a person who dies, for UK inheritance tax. This now matters more than the lifetime allowance for many people.

A worked example

These examples use invented figures and the usual allowances. They are not advice. A pension pot of £900,000 gives a 25% tax-free amount of £225,000, which is below the £268,275 lump sum allowance, so all of it can be tax-free. A pot of £1,500,000 gives £375,000, which is £106,725 above the allowance. That excess is taxed as income at your marginal rate, not at the old 25% or 55% charge.

For many expats with a larger UK pension, a SIPP for expats keeps UK rules and flexibility without the overseas transfer charge. Abolishing the lifetime allowance removes one reason to move, and leaves the other questions, such as currency and where you live, to decide the matter.

Questions to ask your provider

• What allowances do you have on record for me?
• Did any earlier benefit reduce them?
• Do I hold any protection, and how does it apply now?
• How will you deduct tax if a payment goes above an allowance?
• How would a transfer to a QROPS be tested against the overseas transfer allowance?
• Will you give me these answers in writing?

Written answers let a tax adviser in your country check the position, which matters because the rules where you live may treat the same payment differently.

If you were told to move your pension to avoid the allowance

If you were told years ago to move your pension abroad to avoid the lifetime allowance charge, that reason may no longer apply. Check whether the advice relied on the charge, whether a transfer cost you the overseas transfer charge or other fees, and whether the same aim could now be met more simply by leaving the pension in the UK. A UK pension review can compare any past decision with your options today. Rules change often, so what was sensible then should be tested again against the rules now.

What to check now

1. Whether you hold any lifetime allowance protection, and how it applies today.
2. Whether you took benefits before 6 April 2024, and whether your allowances were reduced.
3. How much of your allowances you have used.
4. Whether the 2027 inheritance tax change affects your pension.
5. How your State Pension fits in. See UK State Pension abroad.
6. Whether an old adviser or article told you to move your pension to avoid a charge that no longer exists.

If you want everything set out in one place, a UK pension review is a good first step, and our expat pensions hub covers your options. Read transferring a UK pension abroad before any transfer.

Frequently asked questions

Is the lifetime allowance still in place?

No. It was abolished from 6 April 2024, and the charge stopped applying from 6 April 2023.

What replaced the lifetime allowance?

A lump sum allowance, usually £268,275, and a lump sum and death benefit allowance, usually £1,073,100, along with an overseas transfer allowance for QROPS transfers.

Do I still need a QROPS to avoid lifetime allowance charges?

No. There is no lifetime allowance charge to avoid.

What happens if I go over the new allowances?

The excess is taxed at the marginal rate of income tax, rather than at 25% or 55%.

Does the change apply if I live abroad?

Yes. The allowances apply whether you are UK resident or not.

This article is for information only and is not financial or tax advice. Pension and tax rules can change. Take regulated advice that considers your own circumstances.