Pension Goalposts have moved again

The Spring Budget in February 2020 was rather overshadowed by the start of the Covid-19 pandemic, but did include a number of changes to pension contribution rules, which might have a real impact on you.If your income is over £200,000 but less than £240,000 then, good news, as the Chancellor has extended the boundary on Tapered Annual Allowance (TAA).  You will be able to increase your allowable pension contribution for the 2020/21 tax from £10,000 back to the full £40,000!This is also great news from an income tax perspective as you will of course be able to claim tax relief at your highest marginal rate, making pension contributions still one of the most tax-efficient ways of saving.If your income is over £240,000 then it’s not such good news as your contribution allowance will be tapered by £1 for every £2 over £240,000 income, gradually reducing your contribution allowance down to £4,000 on earnings above £310,000.

Don’t get caught out paying tax on a pension contribution as it defeats the object.

For those whose income sits between £100,000 and £140,000, don’t forget that pension contributions and Gift Aided charitable donations can be used to help regain your personal allowance.  With the effective tax rate on income between £100,000 and £125,000 being a colossal 60% tax, this is a significant saving!

As ever, the devil is in the detail in terms of determining your assessable income levels, existing pension contributions and carry forward scope, so with less than 2 months to the end of the current tax year, do get in touch with us to discuss the finer details of your own pension contribution planning needs.

Risk Warnings:

  • The value of your investments can go down as well as up, so you could get back less than you invested
  • The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in future
  • Bowmore Financial Planning Ltd is authorised and regulated by the FCA
  • Bowmore Financial Planning is not regulated to provide tax advice

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