Do you earn more than £110,000 a year? If so, the new tapered annual allowance could restrict your pensions tax relief. It’s never been more important to get the right advice.
The annual allowance is the maximum amount anyone can tax-efficiently save into a pension each year. For most working people it is currently £40,000. However, a measure introduced in April this year means that top earners can be hit by a taper, which gradually restricts your pension saving by as much as £30,000 a year.
Put simply, if your taxable income from all sources is more than £110,000 a year, you could be affected by the tapered annual allowance. A second test determines your ‘adjusted income’.
Adjusted income includes your taxable income plus the value of any pension contributions made by your employer, including any paid as a result of salary sacrifice.
If adjusted income is more than £150,000 and threshold income is more than £110,000, then the tapered annual allowance kicks in, until your annual allowance reaches a base level of £10,000, once adjusted income hits £210,000.
Any pension savings over the annual allowance are taxed at your highest marginal rate. People with a high income caught by the restriction may have to reduce the contributions paid by them or their employer, or accept an annual allowance charge.
Those affected by the taper could potentially ‘carry forward’ any unused annual allowance, but only from the previous three tax years.
This taper is a highly complex measure, especially for those who are self-employed.
Our friendly, expert team is on hand to assess your situation and give you the best advice possible. It could make a big difference to you.
Call us today on Oakham 01572 759759 or Stamford 01780 437500 to make an appointment.
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