This year’s Autumn Statement turned out to be particularly non-eventful from a tax perspective.
The main change for individual taxpayers will see a (widely-expected) reduction to the pension “Annual Allowance”. From 6 April 2014, the maximum amount which can be paid into a pension for a tax year and attract higher-rate income tax relief will be cut to £40,000 from the current £50,000.
Happily, there would appear to be there are no proposed changes to the “carry forward” rules. This should mean that any unused allowances arising from the 2011-12 to 2013-14 tax years will still be based on the £50,000 limit.
From 6 April 2014, the “Lifetime Allowance” will also be reduced from £1.5m to £1.25m, however. The Lifetime Allowance is the maximum amount of pension saving an individual can build up over your life that benefits from tax relief. If pension benefits are worth more than the Lifetime Allowance when benefits are taken, a tax charge arises on the excess, so it is generally prudent to ensure that this situation does not arise.
Thankfully, therefore, individuals who may be affected will have the opportunity to apply for “fixed protection” such that they continue to benefit from the existing lifetime allowance of £1.5m, subject to various conditions as may be expected (typically that no further pension contributions may be made).
Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... More are also looking at further “personalised protection” which would give individuals a lifetime allowance of the greater of
- the value of their pension rights on 5 April 2014 (up to an overall maximum of £1.5 million); and
- the standard lifetime allowance (£1.25 million from April 2014).
Unlike with fixed protection, individuals with personalised protection would be able to carry on saving in their pension scheme without losing their protection.
Those with significant existing pension savings and those looking to make pension contributions in the next few years should consider carefully how the new regime will affect them.
Elsewhere, some targeted legislation has been introduced to address specific tax avoidance structures, and the Government continues to look for international co-operation as regards the tax-take from large corporates operating in the UK.
Please contact us if the above is likely to affect you and you would like further assistance.