An application for a Transitional Tax-free Amount Certificate (TTFAC) can only be made once. It must be made before your first relevant benefit crystallisation event (RBCE) which occurs after 6 April 2024.
A new Transitional Allowance will take account of any LTA used prior to 6 April 2024. This will reduce your Lump Sum Allowance (LSA) by 25% of the LTA previously used, unless we are provided with a transitional tax-free amount certificate.
Example
If you previously used 50% of the LTA on drawing retirement benefits prior to 6 April 2024, your new Lump Sum Allowance (LSA) would be reduced by £134,137.50 (50% x £1,073,100 x 25%).
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 transitional tax-free amount certificate and should seek independent financial advice if they 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, or to the scheme paying the first RBCE after 6th April 2024
The application must include proof of the total tax-free lump sums you previously received. This means written confirmation from the previous scheme administrators.
If the pension scheme is satisfied with the evidence, they must issue a transitional tax-free amount certificate, certifying that they are satisfied with your transitional tax-free amounts.
These amounts are then deducted from the standard Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA) instead of deducting 25% of the previously used LTA amount