This revenue windfall could tempt the Labour government to reinstate it, pension consultancy Broadstone has warned.

HMRC released its annual private pension statistics last week. They showed that, in 2022-2023, a total of 13,080 LTA charges were reported by schemes through AfT (Accounting for Tax) returns.

That was an increase from 11,720 LTA charges reported in 2021-2022.

The total value of LTA charges reported by schemes in 2022-2023 was £516m, up from £501m in 2021-2022.

David Brooks, head of policy at Broadstone said: “Under the last government, the LTA was a lucrative source of tax revenue for the Treasury, overseeing a spike in tax receipts until its abolition in the spring Budget of 2023. That was largely due to its reduction to £1m in 2016 and then freezing it in 2020.”

Mr Brooks said that as a consequence the new Chancellor Rachel Reeves may well be looking at the charge as a way to boost the so-called ‘black hole’ she said she found in the nation’s finances.

The Labour Party had pledged to reinstate the LTA but abandoned the pledge in the run-up to the election, according to reports.

He said: “With the Chancellor setting out her game-plan for filling in the hole in the UK’s finances, and with more pain set to come at the Autumn Statement, reviving the LTA may be under consideration given Labour’s previous statements before the general election campaign.”

He said the balancing act of raising revenue from large pension savings together with the complexity that could emerge from the reintroduction of the lifetime allowance, which limits pension income rather than the current regime which only restricts tax-free cash, will be very difficult.

Mr Brooks added: “It is possible that the Chancellor will look at more subtle ways of taxing richer pensioners via National Insurance.”

The LTA figures in the HMRC private pension statistics are here.

Before its abolition in April the lifetime allowance stood at £1,073,100. It was the maximum value of benefits that could be taken from a registered pension scheme without being subject to a charge. How much was charged depended on how the individual took their benefits.

Any excess over the lifetime allowance taken as a lump sum was charged at 55%, while any excess used to provide an income, by either a pension annuity or income drawdown was charged at 25% but withdrawals were then taxed at the individual’s marginal rate of income tax.

The Finance Act 2024 set out the main legislation for the abolition of the lifetime allowance, including an unusual clause allowing the Treasury to make subsequent changes to the primary legislation through regulation.