Changes to tax relief on pension contributions
In the Chancellors budget of the 22nd April 2009, a new set of rules were announced for tax relief on pension contributions for those with income of £150,000 or more. Additional rules announced as part of the 9 December 2009 Pre-Budget package extended the clawback of higher rate tax relief to those with ‘relevant income’ of £130,000 or more.
This Update summarises the new regulations as they affect defined contribution schemes, including selfinvested personal pensions (SIPPs) and small self-administered schemes (SSASs).
Until 2011, £20,000 of personal pension contributions (as well as loss reliefs and gift aid donations) are deductible in testing against both the April 2009 £150,000 relevant income limit, and the post 8th December 2009 £130,000 limit.
The 2011 regulations are still subject to consultation and are yet to be announced in detail. It is proposed that they will restrict tax relief on pension contributions for people with income of £150,000 or more. Tax relief will be tapered for income between £150,000 and £180,000 so that at £180,000 it is restricted to basic rate tax relief (currently 20%).
A further change to the anti-forestalling rules from 19th March 2010 allows those caught by the limits to transfer their pension once and retain the protected regular payments.
Andy Stowers
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