The proposal is to reduce the annual allowance by £1 for every £2 of earnings over £150,000. This would taper the annual allowance down to the minimum of £10,000 for those earning £210,000 and above. No mention has been made on whether this would limit the “3 Year Carry Forward” of unused relief from previous years but it has to be a possibility.
A new Budget will be announced by Chancellor George Osborne on 8th July, and it therefore seems likely that, with immediate effect, the annual allowance for pension contributions will be reduced progressively from £40,000 p.a. down to £10,000 for those earning between £150,000 and £210,000.
Whilst there is no certainty that this will be implemented, there is growing media speculation to this end, and we have also had hints from a senior KPMG partner who has been involved in Treasury discussions.
What should you do?
1. If you are earning above £150,000 and planning to make use of your £40,000 current year annual contribution, we strongly advise that this is undertaken before 8th July if personal cash flow permits. This will ensure that 45% tax relief is secured on the full £40,000.
2. If you are contemplating, or are in the middle of a phased plan to use any unused tax relief from the 3 prior tax years, consideration should be given to funding this also before 8th July.
Clearly the first step should be to give our business Associates at Fish Financial a call on 0845 470 7800 and speak to either Mark, Cliff or Ian to clarify your own individual position.
Kind regards
Branston Adams
