| 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.
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 should consider making
contributions up to the current annual
allowance before next April’s plunge.
However, it will not be possible to alter
pension input periods (PIPs) and
transitional rules apply from 14th October
2010 for PIPs ending in 2011/12.
If you have any questions, or for more
advice and information, please
contact us. |
