Are your pension contributions still within the annual allowance?

As we approach the Autumn Statement, we highlight some of the changes looming from 6 April 2016 on pension contributions.

However, before we get to the next tax year, there are still opportunities you need to be aware of in this tax year. For example, many people are unaware that if they paid in £40,000 prior to the July Budget this year, they can also contribute up to a further £40,000 by 5th April 2016. So in this scenario, £80,000 can be contributed in 2015/16, all receiving income tax relief at their highest marginal rate. Similarly, if anyone has any unused annual allowance still available from 2012/13, this is the last tax year you can access it – a ‘use it or lose it’ opportunity.

In terms of the new rules going forward, from 2016-17 onwards, the annual allowance for tax relieved pension savings is being reduced for those with incomes of over £150,000. It will be cut by £1 for every £2 of income an individual has above this level until total income reaches £210,000, when the annual allowance will have been reduced from £40,000 to £10,000. The precise rules are relatively tortuous and involve undertaking two calculations to determine what is ‘threshold income’ and what is ‘adjusted income’. For those of you prepared to wrap your heads in a cold wet towel, please see the attached factsheet.

Needless to say, the Wealth Management team are always on hand to decipher all of this for you.

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