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
 
Richard Alecock
24th May 2019 Making Tax Digital for VAT: Supplier statements now acceptable

In a welcome about turn, HMRC has changed its controversial policy on the recording of purchase invoices under Making Tax Digital for VAT. This will mean a huge time-saving for many businesses using the cash accounting scheme.   Under the cash accounting scheme, input tax is only claimed when payments are made to suppliers, and…

Read More »

Hannah Wisbey
22nd May 2019 Reform of Companies House Register

The government is consulting on proposals to significantly change the role of Companies House, with the aim of ‘increasing the transparency of UK corporate entities and helping combat economic crime’.   The consultation considers reform to: the information that companies are required to disclose increasing the checks on the information disclosed measures to improve the…

Read More »

Matilda Mawson
20th May 2019 Property allowance considerations: Joint properties held in unequal proportions

The property allowance was introduced on 5 April 2017, allowing a flat rate deduction of £1,000 to be claimed against property income, in lieu of keeping detailed records of expenses. This however, raises the question as to whether individuals renting out a joint property are required to make the same claim as one another. In…

Read More »

Bethan Hassey
20th May 2019 RSM’s Zorb Football Tournament

  On Thursday 16th May, Whitings attended RSM’s first ever Zorb Football Tournament in aid of the charity GeeWizz! After playing against 5 other firms, Whitings managed to finish 2nd overall based on goal difference.   It was a great event which helped raise money for a great cause. GeeWizz help support children and young…

Read More »

Matilda Mawson
16th May 2019 2019/20 Changes to Personal Tax and How It Could Save You Money

With the new tax year in full swing, we set out below some of the changes to various allowances and tax bands that affect how much tax you are paying: The personal allowance (the amount you can earn before you begin paying tax) has increased from £11,850 to £12,500. The basic rate tax band has…

Read More »

Jodie Tarbin
14th May 2019 PPR and Lettings Relief: an Update

Shortly following the last autumn budget, I published a blog “CGT Reliefs – Hit with Both Barrels!”, regarding the changes announced to the Principal Private Residence Relief (PPR) and letting relief rules.   HMRC have now published a consultation document, which can be found here: https://www.gov.uk/government/consultations/capital-gains-tax-private-residence-relief-changes-to-the-ancillary-reliefs   The consultation period closes at 11:45pm on 1…

Read More »