Act now before the pension annual allowance falls
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Since the coalition announced the scrapping of measures which would have seen those earning at least £150,000 lose some or all of their higher rate tax relief, we have been waiting with baited breath to find out what the alternative would be.
At last, we know that the government has gone for the simpler option of limiting the tax-free amount that can be contributed each year. From April 2011, the annual allowance for tax relief on pension contributions will be £50,000.
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While this is a huge drop from the current limit of £255,000, it is certainly higher than the previously predicted allowances of between £30,000 and £45,000. In addition, unused relief from the previous three years can be carried over.
Another cause for celebration is the coalition’s rejection of the proposal to cap tax relief at 40 percent. The reduction of the lifetime allowance to £1.5 million is, however, not such joyful news, although those affected will have an extra year to plan as this is not being introduced until April 2012.
Anyone regularly contributing over £50,000, or with earnings for the current tax year of less than £130,000, who is contemplating making substantial pension contributions should do so this tax year so as to maximise their higher rate income tax relief.
Please contact us to discuss your own personal circumstances and to obtain more information. |
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