The current limit for individuals making pension contributions in 2019/20 stands at the lower of, 100% of their UK relevant earnings or £40,000. This is called the Annual Allowance. However, since April 2016 the Annual Allowance of £40,000 is restricted for higher earners under what is called the Tapered Annual Allowance.
The taper applies to individuals with a taxable adjusted income of more than £150,000 and a threshold income over £110,000.
For every £2 of income an individual has over £150,000, their annual allowance is reduced by £1, down to a minimum of £10,000.
These rules have caused unexpectedly high tax bills for some NHS professionals, and this has meant extra shifts have been refused as a result. It has also affected many other workers outside of the NHS.
There is now a fear that the delivery of public services is at jeopardy due to the tax changes implemented back in 2016. In response to these worries, the Treasury have announced they will review the tapered annual allowance for pensions, following calls from high-earning NHS clinicians to abolish it.
Eldon currently deal with a variety of clients who experience issues with the Tapered Annual Allowance to ensure the tax can be controlled in the best manner, given a client’s circumstances. If you feel that you may be affected by the Tapered Annual Allowance, please don’t hesitate to get in touch and we will be more than happy to help.