Any pension contributions above £10,000 will incur tax charges. Stay up to date with all the Prydis latest news and events. On 6 April 2016 the government introduced the Tapered Annual Allowance for individuals with “threshold income” of over £110,000 AND "adjusted income" of over £150,000. The table below shows which aspects of the process are covered in each example. %PDF-1.5 %���� 4 0 obj Their income exceeds the adjusted income limit by £90,000. Terms and Conditions | Legal | Privacy Policy. Statements issued in October 2020 will relate to pension growth in the 2019/20 year. example 1. As of 6 April 2020 the Tapered Annual Allowance applies for individuals with “threshold income” of over £200,000 AND "adjusted income" of over £240,000. Her employer makes a £30,000 contribution and she personally makes a contribution of £10,000. For the taper to apply to you, you must exceed both thresholds. Therefore, Diana’s ‘Adjusted Income’ is £335,000 i.e. Example 1 - employer contribution causes tapered annual allowance Robert has total income of £230,000 and his employer pays £30,000 into his SIPP during the 2020/21 tax year. This allows you to offset sudden spikes in income to avoid additional tax charges. Diana’s tapered Annual Allowance is £4,000 i.e. 0000064939 00000 n 0000019136 00000 n 0000009458 00000 n £40,000 - (£335,000 - £240,000) / 2 subject to a minimum of £4,000, Eileen has a taxable income of £225,000. Example 2: David Employment income: £130,000 Dividends income: £10,000 Personal pension contributions: £13,000 Employer pension contributions: £12,000 Threshold income: £127,000 (£130,000 + £10,000 – £13,000) Adjusted income: £165,000 (£130,000 + £10,000 + £25,000) David exceeds the limits for both threshold income and adjusted income. Example 2 – adjusted income above £240,000 Georgina has salary of £220,000 and investment income of £10,000 in the 2020/21 tax year. You consent to our cookies if you continue to use our website. Her employer makes a £30,000 contribution and she £40,000 - (£152,500 - £150,000) / 2. From 6 April 2020, if your ‘Adjusted Income’ exceeds £240,000, then your Annual Allowance will be gradually reduced from £40,000 to £4,000, with £1 of allowance lost for every £2 of Adjusted Income over £240,000 (in a similar fashion to the reduction of the personal allowance on earnings over £100,000). 0 Then add the total contributions to your pension scheme. Eileen’s total increase in DB savings for the tax year is £27,500 and she pays no AVCs or contributes to pensions outside of ABF. Example 3: Rebecca Employment income: £200,000 Rental income: £20,000 Personal pension contributions: £20,000 Employer pension contributions: £20,000 Threshold income: £200,000 (£200,000 + £20,000 – £20,000) Adjusted income: £260,000 (£200,000 + £20,000 + £40,000) Like David, Rebecca exceeds the limits for both threshold income and adjusted income. 0000010986 00000 n 0000014351 00000 n 0000000016 00000 n endobj Example 2 – adjusted income above £240,000 Georgina has salary of £220,000 and investment income of £10,000 in the 2020/21 tax year. Therefore, Eileen’s ‘Adjusted Income’ is £252,500 i.e. endstream endobj startxref ... As illustrated in Example 4 above, any unused annual allowance being carried forward to 2015/16 from the three tax years immediately prior to it is applied to the pre-alignment tax year first with any remainder being available for the post-alignment tax year. example 1 Edith has the following income and benefits in the tax year 2016/17; Salary £100,000 Company car £5,000 Dividends £4,000 To talk to one of our team and discuss our services, get in touch to see how we can help. London ), and add to this the total value of pension savings in that year i.e. 1 0 obj Email DCPensionAdmin@abfoods.com, Skip to the Search section of current page [s], Skip to the Top section of current page [t], Skip to the Content section of current page [c], Skip to the Bottom section of current page [b], The split Pension Input period for 2015/16, Diana has total taxable income of £300,000. 79 0 obj <>stream trailer <<88A17CEEEE26477894A638F41287BEC1>]/Prev 101828>> startxref 0 %%EOF 37 0 obj <>stream the increase in total value of any DB benefits plus any DC type contributions (including AVCs). Assumptions. Diana’s tapered Annual Allowance is £10,000 i.e. 0000001950 00000 n If you prefer to email or write to the team, the contact details are listed below. %���� People with a taxable adjusted income of more than £150,000 have their annual allowance for that tax year restricted. £40,000 - (£252,500 - £240,000) / 2, Diana has total taxable income of £190,000. During 2019/20, the tapered annual allowance will have a much larger impact on those affected. Adjusted income is your total taxable income – so salary, dividends, rental income, savings interest, plus employer pension contributions.