A transitional tax free amount certificate replaces the standard assumption that 25% of the lifetime allowance you used before 6 April 2024 came out as tax free cash with the amount you actually took. It only helps if you took less than that, for example because you did not take your maximum pension commencement lump sum, and it must be issued before your first lump sum on or after 6 April 2024.
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How is the lump sum allowance reduced for benefits taken before April 2024?
From 6 April 2024 the lifetime allowance was replaced by the lump sum allowance, which for most people is £268,275, and the lump sum and death benefit allowance of £1,073,100. Our guide to the lump sum allowance covers how it works in general.
If you had any benefit crystallisation events before 6 April 2024, your scheme does not ask what you actually took. Under paragraph 125 of Schedule 9 to the Finance Act 2024 it applies the standard transitional calculation: it takes your lifetime allowance previously used amount and deducts 25% of it from the lump sum allowance. If what is left is nil, you cannot take any more tax free lump sums. The lump sum and death benefit allowance is reduced in the same way, although the full previously used amount is deducted where a serious ill health lump sum or a lump sum death benefit was paid under age 75.
When does a certificate give a bigger allowance?
The certificate is worth having only where your actual tax free lump sums before 6 April 2024 were less than 25% of the lifetime allowance you used. HMRC’s own example is someone who did not take their maximum pension commencement lump sum. Other situations include:
- a defined benefit pension taken with little or no commutation, so most of the value went into pension income rather than cash
- benefits tested at age 75 under BCEs 5, 5A or 5B, or crystallised by BCE 8, where no tax free cash was paid; HMRC confirms these people can apply
- someone who used 100% or more of their lifetime allowance, who has nil lump sum allowance under the standard calculation but can apply if less than all of it went on tax free amounts
The certificate records the actual lump sum transitional tax free amount, meaning the pension commencement lump sums, uncrystallised funds pension lump sums and stand alone lump sums you were entitled to before 6 April 2024, so far as no income tax arose on them. That figure, not the 25% assumption, is then deducted from your lump sum allowance.
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When should you not apply?
HMRC says most members should not need a certificate and should not apply where it might leave them with less allowance than the standard calculation. There is no option to compare the two results: once a certificate is issued you cannot go back to the standard calculation. If you took a large lump sum under scheme specific lump sum protection, the 25% assumption is already likely to suit you, and HMRC does not expect such people to need a certificate.
Some people cannot apply. If your only pensions in payment began before 6 April 2006 and you had no benefit crystallisation event between 6 April 2006 and 5 April 2024, you are outside the scope of the certificate.
Who do you apply to, and when?
You apply to a certification administrator. That is the scheme administrator of any registered pension scheme you are a member of, or an insurance company to which a scheme has transferred funds to buy your scheme pension or lifetime annuity. You cannot apply to a scheme you are about to join. Personal representatives can apply for a member who has died.
Timing is the hard rule. The certificate must have been issued, not just applied for, before your first relevant benefit crystallisation event, such as the payment of a pension commencement lump sum or an uncrystallised funds pension lump sum on or after 6 April 2024. The scheme has three months from receiving the application to issue a certificate or a notice of refusal. HMRC can charge the administrator £300 for failing to do either. If you are about to take a lump sum, build those three months into your plans.
What counts as complete evidence?
You must send complete evidence of every lump sum and lump sum death benefit you became entitled to before 6 April 2024, and it must account for the total percentage of lifetime allowance you used. That lets the scheme see what share of the benefits came out tax free. Financial records, benefit crystallisation event statements and bank statements are the examples HMRC gives. The administrator decides whether the evidence is enough, and insufficient evidence is the only ground for refusal. You can add evidence within the three months, but the clock does not restart.
One off statements issued under paragraph 130 of Schedule 9 show the percentage of lifetime allowance used under that scheme at 5 April 2024, so if you received one it is a good place to start.
What happens after a certificate is issued?
If you have other schemes, you must send each of their administrators a copy within 90 days of receiving the certificate and before your next relevant benefit crystallisation event. A certificate cannot be amended. If a scheme finds it is wrong, it must cancel it, and your allowances are recalculated on the actual figures, which can mean more tax. You can reapply only if you have not yet had a relevant benefit crystallisation event. A false statement made fraudulently or negligently can lead to a £3,000 penalty under section 264 of the Finance Act 2004.
A worked illustration
Illustration only. Ken retired from a defined benefit scheme in 2019. His statement shows he used lifetime allowance worth £400,000, and he took a tax free lump sum of £40,000.
| Approach | Deduction from lump sum allowance | Lump sum allowance left |
|---|---|---|
| Standard calculation (25% of £400,000) | £100,000 | £168,275 |
| With a certificate (actual lump sum) | £40,000 | £228,275 |
If Ken plans to take 25% tax free cash from a personal pension later, the certificate gives him £60,000 more tax free capacity. He must have it issued before that first lump sum is paid.
What about public service members affected by McCloud?
For members with remediable service, the McCloud remedy may change benefits taken before April 2024. HMRC told schemes in July 2026 that where a member has not yet been offered a choice, or the choice has not been implemented, they cannot be confident the pre April 2024 figures are correct and should not issue a certificate where the data is uncertain. The government does not plan to change the certificate rules for these members. Top up payments made because of the remedy on or after 6 April 2024 are not relevant benefit crystallisation events, so they do not shut the door on an application. See the McCloud remedy and public sector pension tax.
What mistakes come up most often?
- Applying after the first lump sum has been paid, or applying in time but taking the lump sum before the certificate arrives.
- Applying when you took a full 25% or more, which can only reduce your allowance with no way back.
- Sending evidence of the lump sums but not of total lifetime allowance used.
- Not copying the certificate to your other schemes within 90 days.
- Confusing the certificate with the lump sum and death benefit allowance rules for death benefits, which the same certificate also covers.
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Related Accountapedia entries
- Certificates of UK residence for treaty claims
- IHT30 clearance certificates
- Share certificates
- Practising certificates: when accountants need one
- Transitional serial interests
Sources
- GOV.UK: Manual page PTM174300
- GOV.UK: Lifetime allowance lta abolition frequently asked questions
- GOV.UK: Manual page PTM174100
- GOV.UK: Newsletter 158 april 2024
- GOV.UK: Newsletter on the public service pensions remedy june 2026
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.