Andrea Steel, a member of our Private Client team, talks about an opportunity for boosting pension contributions
Most UK tax payers are allowed to pay up to the value of their earned income (subject to a cap of £40,000) into their pension each financial year and benefit from generous tax relief from HMRC.
Those who have earnings over £40,000 and wish to contribute more than this may be able to do so and receive tax relief on a larger contribution, using something called carry forward. This is only available where the full annual allowances of £40,000 have not been used for the past three tax years and is subject to the overriding condition that the value of contributions cannot be more than the level of earned income in the year that they are made.
Carry forward effectively enables investors to roll over any unused annual allowance for pension contributions for three tax years, as long as their earned income in the current tax year is sufficient to cover this. If they earn over £150,000, however, rules introduced in 2016 mean that their annual allowance has been tapered, reducing the amount they may contribute and claim tax relief by £1 for each £2 over £150,000 they earn, down to an annual allowance of £10,000 if they earn £210,000 or more.
So what does this mean?
This is the last opportunity for individuals who earn over £150,000 per annum and would like to make a larger pension contribution to make use of the more generous £40,000 annual allowance for the 2015/16 tax year, if they have not done so already.
If you would like more information or to discuss this further, please contact us here.
Please note the above is for information purposes only and does not constitute advice or a personal recommendation. Our Relationship Managers are able to provide specific pensions advice and as part of that process they will consider the options that are available to you and recommend what best meet your needs.
If you interested in that service we recommend that you arrange to meet with one them by contacting us here.