Govt banks £350m in lifetime allowance charges

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The Government has collected £353m in tax charges paid by people breaking the lifetime allowance limit, leading to renewed calls to scrap the penalty.

A freedom of information request submitted to HMRC by AJ Bell, and seen by Money Marketing, reveals £352,888,336 has been paid between 2006/7 and 2014/15.

The annual take from the measure – a combination of 25 per cent and 55 per cent charges – steadily rose from £9m in 2007/8 to £83m in 2013/14. Although the figure fell slightly in 2014/15, calls to scrap the charge are growing louder.

AJ Bell head of technical resources Gareth James says: “It’s only to be expected that the level of tax raised has increased as the lifetime allowance has fallen.

However, in the context of the economic concerns that recently made the Government consult on wider reforms of pension tax relief, it is questionable whether the amount of tax raised by the lifetime allowance over the last 10 years has been sufficient to justify the complexity that it continues to cause.”

Meldon & Co managing director Mark Meldon says: “It’s a terrifically complex problem to sort out for clients. I have seven clients affected at the moment but the number is going to rocket in the next five years as the babyboomers hit retirement age.

“The whole thing is a nonsense, the lifetime allowance and the annual allowance is a huge  discincentive to financial self-sufficiency.”