15 July 2015

Summer Budget 2015 - Pension Tax Relief

As previously announced, the Lifetime Allowance for pensions (which is the maximum value of pension you can hold and still get full tax relief) will be reduced from £1.25m to £1m from April 2016. As has happened in the past, those whose pensions are already over £1m will have protection available. From April 2018, the Lifetime Allowance will actually increase (in line with CPI).

The Annual Allowance limits how much you can contribute to pensions in a year. That is currently £40,000. For higher earners (over £150k including pension contributions AND over £110k excluding pension contributions) the Annual Allowance will be reduced progressively.

For the self-employed (who don't necessarily know their earnings until the end of the year) that could cause problems and result in a surprise Annual Allowance tax charge. Overall it may be worth putting as much in as possible in the current tax year - particularly if you are a higher earner.

There will be a consultation on a wider reform of pensions tax relief. More changes to confuse everyone!

Pension tax is complicated. Taking professional advice makes sense,

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