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
 
Vanessa Pearson
18th June 2018 Public Sector contractor wins IR35 case

HMRC have lost a second IR35 case this year, and their second case against the same contractor, putting into doubt their own understanding of the IR35 rules. Ian Wells, director of personal service company Jensal Software Limited provided his services to the Department of Work and Pensions via a recruitment agency during 2012 and 2013.…

Read More »

Jeannette Hume
18th June 2018 EIS Money: Beware how you spend it!

Tech companies that are financed through EIS equity cash will be aware that this ‘tax wrapper’ can be super-generous, but that many criteria have to be met to ensure eligibility. One of these long standing criteria has been that the company must use the proceeds (up to £5m pa) raised: In either a qualifying trade…

Read More »

Thomas Carter
15th June 2018 Making Tax Digital, VAT and newly registered businesses

All VAT registered businesses with a turnover over the current VAT registration threshold of £85,000 will be required to comply with the Making Tax Digital (MTD) record keeping and reporting requirements for VAT periods which start on and after 1st April 2019. Where a business is VAT registered but has turnover under £85,000 at April…

Read More »

Jodie Tarbin
11th June 2018 Changes ahead for CGT payment

HM Revenue & Customs is proposing, in less than two years’ time, to rewrite the rules around Capital Gains Tax, CGT, following the disposal of a residential property. The current timescale for payment is going to be slashed to 30-days. From April 6 2020, a payment-on-account of CGT, will be required following the sale of…

Read More »

Richard Alecock
4th June 2018 Property Allowance

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property. The property allowance applies to relevant property income which includes: Both UK and overseas property businesses. Both commercial and residential letting (but not rent-a-room businesses – see below).Where property income exceeds £1,000, the legislation…

Read More »

Victor Courdelle
4th June 2018 Whiting & Partners Now Xero Platinum Champion Partner

We are very proud to announce that on 23 May 2018 we achieved Xero Platinum Champion Partner status, joining a select group of 80 other firms Nationwide.  The hard work of all Partners and Staff in reaching this milestone is a credit to each individual and the Firm as a whole. Many of our clients…

Read More »