March 10th, 2017

Are your annual allowances for pension contributions restricted for 2016/17?

For 2016/17 there is an additional restriction, called the Tapered Annual Allowance, for high earners (over £150,000 per annum).  For every £2 of income above £150,000 £1 of annual allowance is lost.  This is capped at earnings of £210,000 which provides an annual allowance cap of £10,000.

The annual allowance is currently capped at £40,000.  This allowance applies across all schemes and is not a ‘per scheme’ limit and includes all of the contributions that you or your employer pay or anyone else who pays on your behalf.  It also applies to defined benefit pension schemes which are valued at how much they have increased in the year.

For 2016/17 there is an additional restriction, called the Tapered Annual Allowance, for high earners (over £150,000 per annum).  For every £2 of income above £150,000 £1 of annual allowance is lost.  This is capped at earnings of £210,000 which provides an annual allowance cap of £10,000.

There is some relief that can be gained from this situation if you have unused allowance in the previous 3 years as you can carry forward this allowance into 2016/17.

So, if you have earnings over £150,000 and gross pension contributions of over £10,000 you may potentially have a problem.  if you exceed your annual allowance then you will be faced with an additional charge on your 2016/17 tax return.  If the annual allowance charge is more than £2,000 you can ask your pension scheme to pay the charge from your benefits.  If you decide to do this, you need to provide a reference on your tax return from your pension scheme so you need to do well in advance of the filing deadline.

You may also have unused annual allowance relief carried forward that you may consider utilising before 5 April 2017.

If you think this may apply to you, please get in touch and we can arrange a review.

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Alison obtained a First class degree in Accountancy and Management at UCLAN University. She then went on to qualify as a certified accountant in 2006 and became a founder member in 2011.

Alison trained at a practice in Liverpool and, within her 10 years there, she developed as an accounts manager and obtained a varied portfolio of clients which has provided her with a range of experience in accounts, audit, VAT and taxation.
Alison specialises in giving sound jargon-free advice to a range of small and medium sized businesses.

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