Transitional tax-free amount certificate (TTFAC)

1. What is a transitional tax-free amount certificate (TTFAC)?

This is a certificate designed to confirm the amount of Individual's lump sum allowance (ILSA) and how much Individual’s lump sum and death benefit allowance (ILSDBA) is used up by events prior to 6 April 2024. Read 'Transitional regime for past crystallisations' for an explanation of how the certificate works and how to do the calculation. If the only benefit taken is a Pre A-day pension, your client can’t apply for a TTFAC.

2. Who should apply for a TTFAC?

There is no black and white definitive list as to who should apply for a certificate. This is because although it might appear at first sight to be scenario that would benefit from a TTFAC, previous crystallisations in years where the lifetime allowance was higher could offset any benefit gained by a TTFAC. 

Here are 9 scenarios where you should carry out a calculation to determine whether your client should apply for a TTFAC.

1. Benefit crystallisation events, when the lifetime allowance was less than £1,073,100
2. Your client is over age 75
3. Defined benefit scheme increases
4. Benefit crystallisations with no tax-free cash taken
5. Benefit crystallisations with less than 25% tax-free cash taken
6. Crystallisation of a disqualifying pension credit
7. Transferring to a QROPS prior to 6/4/24
8. 100% of lifetime allowance used
9. Serious ill health lump sum taken

1. Benefit crystallisation events, when the lifetime allowance was less than £1,073,100

If your client does not have any protection and crystallised when the lifetime allowance (LTA) was less than £1,073,100, they could benefit from a TTFAC.

2. Your client is over age 75

If your client is over age 75, they will have had a lifetime allowance test at age 75. Unlike the pre 6 April 2024 rules, the age 75 test on uncrystallised funds is not disregarded under the transitional standard calculation. Therefore this client could benefit from a TTFAC.

3. Defined benefit scheme increases

If your client has had a benefit crystallisation event because there was an increase to their scheme pension, this will have used up lifetime allowance (LTA) without there being any PCLS paid. Therefore this client could benefit from a TTFAC.

4. Benefit crystallisations with no tax-free cash taken

If your client previously designated to drawdown, purchased an annuity or took a scheme pension and they did so without taking any tax-free cash, they will benefit from a TTFAC.

5. Benefit crystallisations with less than 25% tax-free cash taken.

If your client previously crystallised and took less than 25% as tax-free cash, they may benefit from a TTFAC.

6. Crystallisation of a disqualifying pension credit

If your client has previously crystallised a disqualifying pension credit, they would not have been able to take tax-free cash from it, however it will have used up lifetime allowance (LTA). A TTFAC may lead to more tax-free cash being available.

7. Transferring to a QROPS prior to 6/4/24

Prior to 6/4/24, transferring to a QROPS was a crystallisation event that used up lifetime allowance (LTA). There is no disregard to LTA used by a QROPS transfer under the standard calculation so a TTFAC may allow for more tax-free cash.

8. 100% of lifetime allowance used

If you have a client who has used 100% of the lifetime allowance but has remaining uncrystallised money to be used for a serious ill health lump sum or death benefits, applying for a TTFAC could lead to 75% of the ILSDBA becoming available.

9. Serious ill health lump sum taken

If you have a client who has had multiple crystallisations of which one was a serious ill health lump sum (SIHLS), they may benefit from a TTFAC.

3. Who should not apply for a TTFAC?

Where a client has previously crystallised when the lifetime allowance (LTA) was higher, a TTFAC might lead to a worse outcome. This is because under the standard calculation previously used LTA is revalued in line with LTA changes. There is no revaluation of previously taken tax-free cash under a TTFAC.

Remember that once a TTFAC has been applied for, the result is binding. So you should carry out your own calculation before encouraging your client to apply for a TTFAC.

4. Help with comparisons

Use our calculator to carry out a comparison to see which calculation would be better for your client.

Transitional Regime calculator