It has been rumoured that in the upcoming budget on 8th July that one of the chancellors target areas could be restricting the higher rate tax relief on personal pension contributions made by higher earners.
For those individuals with incomes in excess of £150,000 the Conservative government proposes to reduce the annual allowance to £10,000 once income reaches £210,000. In other words, for every £1 of income over £150,000 that an individual earns 50p of annual allowance (currently £40,000) is lost. For example if an individual’s income was £160,000 then his annual allowance would fall to £35,000. The annual allowance includes both personal and employer contributions.
The Conservative proposals allow anyone with an income up to £150,000 to retain the entitlement to put £40,000 into a pension annually and receive higher rate tax relief on these contributions.
With these proposals in mind you may wish to consider making additional personal pension contributions prior to budget day to take advantage of the 45% tax relief whilst it still remains. Clearly the proposals could be subject to change, and there may be other announcements in the budget which will also affect you.
We will be happy to advise you as to any unused annual allowances that you have up to and including today, however please remember we cannot give you investment advice but would be happy to introduce you to our Independent Financial Advisers. Call us today on 0845 177 5500 or use our on-line form.