Posted by Nick Day on 09 Sep 2015
UK Pension Planning for the 2015/16 Tax Year
Pension contributions to a UK registered plan remain a highly tax-advantaged strategy with personal tax relief due at up to 60% depending on your income level, and tax-free growth within the pension fund once contributions have been made.
Prior to the summer Budget speech on 8 July 2015, the annual limit (Annual Allowance – or AA) for making pension contributions (combined employee and employer payments) had been £40,000, with the scope to carry forward unused relief from the previous three tax years where applicable.
However, the summer Budget speech announced proposed changes that will restrict the ability of “high earners” (individuals whose income, including pension contributions, exceeds £150,000 pa) to claim tax relief on pension contributions from 6 April 2016 onwards. To simplify the changeover to the new rules, special transitional arrangements have been put in place which mean in broad terms:-
- The AA for the period 6 April to 8 July 2015 is £80,000.
- The AA for the period 9 July 2015 to 5 April 2016 is £Nil.
- If any of the £80,000 AA for the period 6 April to 8 July 2015 is unused, it can be carried forward to the period 9 July 2015 to 5 April 2016, but only up to a maximum of £40,000.
This means that valuable opportunities remain to make tax-efficient pension contributions before the current tax year ends on 5 April 2016. If you would like advice regarding this new allowance or how to utilise any unused relief from earlier years, please let us know as for example, we can prepare calculations to estimate the maximum amount you could contribute and receive tax relief on in the current 2015-16 tax year.
It is important to also be aware of the overall lifetime limit (known as the Lifetime Allowance) each individual has for UK registered pension funds when carrying out pension planning.
This is currently £1.25 million (reducing to £1 million from 6 April 2016) and we will take it into account as necessary when advising you. If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or email@example.com
- Property Partnership Incorporation and SDLT
- Top 10 Expat Tax Tips for Individuals Moving to the UK
- Tax Relief For Residential Mortgages
- Overseas Pension Changes 6 April 2017
- Non-Resident CGT – April 2019 Changes