Tapered Annual Allowance

29th January 2017

Pension Contributions: Maximum now restricted by tapered annual allowance.
The annual allowance is the maximum value of pensions savings that you, your employer and other third parties can pay into your pensions each year without incurring a tax charge. The standard annual allowance for the 2016/17 tax year is £40,000. If you are a high-income individual for a tax year, your annual allowance will reduce by £1 for every £2 of adjusted income above £150,000 up to £210,000. If your adjusted income is over £210,000, your annual allowance will be £10,000.

Example:
In the 2016/17 tax year Jerry has a salary of £100,000 and receives £30,000 of dividends. He pays £15,000 gross of personal contributions to a SIPP. His employer also pays a contribution of £25,000.
His threshold income is:
Salary (£100k) + Dividends (£30k) – Personal Contributions (£15k) = Threshold Income (£115k)
His adjusted income is:
Salary (£100k) + Dividends (£30k) + Employer Contributions (£25k) = Adjusted Income (£155k)
Therefore Jerry is a high-income individual for the 2016/17 tax year.
The standard annual allowance is reduced by £1 for every £2 of adjusted income over £150,000: £155,000 (adjusted income) – £150,000 = £5,000 excess income £5,000 ÷ 2 = £2,500 reduction
£40,000 (standard annual allowance) – £2,500 = £37,500 tapered annual allowance.



 
Other items in Blogs
 
Chris Kelly
25th September 2020 COVID-19 Business Support – Winter Economy Plan

  With the Autumn Budget cancelled the Chancellor has announced a Winter Economy Plan introducing a package of measures to support businesses.   The highlights are:   The Coronavirus Jobs Retention Scheme (CJRS) – Will end as planned on 31 October 2020.   A new Job Support Scheme – To support viable UK employers who…

Read More »

Steven Denton
25th September 2020 HMRC Job Support Scheme (JSS)

On 24th September the government announced the launching in November of the Job Support Scheme to replace the existing Furlough Scheme that is feted to end on 31st October. The JSS is to run from 1st November through to 30th April, but initial rules may be amended after three months.   To qualify for the…

Read More »

Matilda Mawson
25th September 2020 2019/20 Pension Savings Statement – Request yours today!

  If you have made contributions to a registered pension scheme of more than £40,000 in the tax year, your scheme administrator should automatically send you a pension savings statement by 6 October 2020. This will detail your total pension input for the 2019/20 tax year as well as your pension input for the 3…

Read More »

Ian Piper
24th September 2020 Corporation Tax due soon: Not necessarily.

Companies with 31 December 2019 year ends will be due to pay their corporation tax on 1 October 2020. If that company is expecting to suffer a loss during the 2020 financial year, perhaps due to COVID-19 related reasons, it should be possible to carry that loss back one year and claim a refund of…

Read More »

Ruth Pearson
17th September 2020 Fuel Rates From September 2020

HMRC have updated the latest company car advisory fuel rates. These rates apply from 1 September 2020.   The guidance states that you can use either the previous or current rates, for up to one month from the date the new rules apply.   The new rates per mile are below: Engine size Petrol LPG…

Read More »

Robert Baxter
16th September 2020 Redundancy Pay & Payment in Lieu of Notice (PILON)

HMRC have introduced legislation which ensures employee’s statutory rights, including redundancy pay and payment in lieu on notice (PILON), are based on an employee’s normal pay and not their furlough pay.   Redundancy pay   An employee is entitled to redundancy pay if they have been working for their current employer for 2 years or…

Read More »