The Chancellor will deliver his Budget on Wednesday 16 March and it is widely expected he will unveil a new wave of pension changes to add to the growing list of revisions made by Number 11 Downing Street in recent years.
There is much speculation amongst commentators that George Osborne will announce a move to a flat rate system of tax relief (estimates ranging from 25% to 33%) with immediate effect, axing the generous tax breaks available to higher and additional rate taxpayers in the process.
In the most extreme case, tax relief may be scrapped entirely, although this is not anticipated to be the preferred course of action. Individuals with carried forward pension contribution allowances should consider utilising these before the Budget in case restrictions to tax relief are announced.
Some individuals with the past three years’ pension contribution limits available will be able to make contributions of up to £180,000 (gross). Additional rate taxpayers stand to lose out to the tune of up to £81,000 if tax relief is changed on 16 March.For individuals with income from all sources totalling more than £150,000 (including earnings, employer pension contributions, rent from property and other investment income), the annual allowance will be tapered from 6 April 2016; for those with income in excess of £210,000 it will be just £10,000 next tax year.
Therefore, this may be the final opportunity for many to make significant tax-relievable pension contributions. In addition, the pensions lifetime allowance is due to fall to £1m from 6 April 2016. This will draw many more pension savers closer to potentially incurring punitive tax charges in the future.
The lifetime allowance should be taken into account before making any extra contributions and, in this context, it should be noted that there are protections that can be applied for after the turn of the tax year.
To request a call with one of our Chartered Financial Planners to discuss your options, please contact 020 7315 6500.