Give us your details and we’ll be in touch asap

Insights

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Budget stuff  •  Business Services  •  Business Tax  •  pensions  •  Personal tax  •  Tax Planning  •  Tax Relief

Budget brings restriction to pension tax relief for highest earners

By Lesley Stalker on 28 July 2015

 

In part 4 of our special Summer Budget 2015 tax planning series, we highlight the new restrictions to tax relief on pensions. We blogged about the possibility of pension tax relief being announced just before the Budget, advising clients to consider bringing forward any future pension contributions if possible.

Currently pension contributions, although capped at an annual allowance of £40,000, attract income tax relief at the top rate of tax applying to the investor. Following the July 8th Budget, this relief will be restricted with effect from 6th April 2016 for those on higher incomes.

The restriction will be in the form of a tapered reduction in the amount of the annual allowance and the new rules have been designed to limit the scope for tax avoidance through salary sacrifice. Specifically, the restricted tax relief will apply to individuals who have an income, including the value of any pension contributions, of over £150,000 and who have an income (excluding pension contributions) of over £110,000.

This somewhat complex wording has apparently been put in place in order to prevent individuals from avoiding the restriction by sacrificing salary for employer pension contributions.

The restriction will work by gradually reducing the annual allowance of £40,000 by £1 for every additional £2 of income over £150,000 a year. There will however be a minimum allowance of £10,000 a year for everyone.

The long term cost of providing tax relief for pension savings is a major concern for the government; it has launched a consultation on ‘strengthening the incentive to save’ to address this.

We will be announcing any further updates as information becomes available.

Tax planning post Summer Budget

You can also read our other Summer Budget 2015 tax planning articles focusing on:

In the meantime, if you want to discuss any aspect of tax planning in relation to pension contributions in more detail please contact Lesley Stalker by emailing las@rjp.co.uk.

 

Read more articles like this

‘New Age’ Budget for the ‘new normal’ – Budget 2021 Outcomes

Budget 2021: New “super deduction” capital allowances for companies

Spring Budget 2021 Update – What’s in it for you?

3 possible tax changes coming in the Spring 2021 Budget

Covid Business Support: How could you benefit from the Winter Economy Plan?

Share this:

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Image

60 Day Deadline for CGT Returns and Tax Payments

If you sell a property and incur capital gains tax on the transaction, you will need to file a tax return and also pay any tax that is due within 60 days of completion, or penalties will arise. Need help with your property taxes? Talk to us.

 

In part 4 of our special Summer Budget 2015 tax planning series, we highlight the new restrictions to tax relief on pensions. We blogged about the possibility of pension tax relief being announced just before the Budget, advising clients to consider bringing forward any future pension contributions if possible.

Currently pension contributions, although capped at an annual allowance of £40,000, attract income tax relief at the top rate of tax applying to the investor. Following the July 8th Budget, this relief will be restricted with effect from 6th April 2016 for those on higher incomes.

The restriction will be in the form of a tapered reduction in the amount of the annual allowance and the new rules have been designed to limit the scope for tax avoidance through salary sacrifice. Specifically, the restricted tax relief will apply to individuals who have an income, including the value of any pension contributions, of over £150,000 and who have an income (excluding pension contributions) of over £110,000.

This somewhat complex wording has apparently been put in place in order to prevent individuals from avoiding the restriction by sacrificing salary for employer pension contributions.

The restriction will work by gradually reducing the annual allowance of £40,000 by £1 for every additional £2 of income over £150,000 a year. There will however be a minimum allowance of £10,000 a year for everyone.

The long term cost of providing tax relief for pension savings is a major concern for the government; it has launched a consultation on ‘strengthening the incentive to save’ to address this.

We will be announcing any further updates as information becomes available.

Tax planning post Summer Budget

You can also read our other Summer Budget 2015 tax planning articles focusing on:

In the meantime, if you want to discuss any aspect of tax planning in relation to pension contributions in more detail please contact Lesley Stalker by emailing las@rjp.co.uk.