Insights

Last year’s Budget brought a number of changes to pension regulations. As a result there are some last minute tax and investment planning opportunities to be aware of for those wishing to make further pension contributions in the current tax year.

1. From 6 April 2016, the pension "annual allowance" for high earners (individuals with over £150,000 in taxable income) reduces. The amount of the annual allowance will be gradually reduced from £40,000 to £10,000 for those earning between £150,000 and £210,000 a year

2. Existing rules governing pension contributions apply until 5 April 2016 and it may be advisable to make the maximum contribution possible before the annual allowance reduces.

3. For some taxpayers, where pension contributions have not been made in recent years, it may be possible to contribute up to £180,000 before the end of the current tax year. If you are a 45% taxpayer, this will actually only require an investment in real terms of £99,000.

4. Following the July 2015 Budget, some taxpayers were able to secure an additional £40,000 annual allowance for the current 2015-16 tax year if they made additional pension contributions between 6 April 2015 and 8 July 2015. This means qualifying taxpayers will have created the entitlement to make an additional £40,000 contribution before the end of the tax year on 5 April 2016.

5. Currently, the total value of assets a taxpayer is allowed to hold in a pension and qualify for tax relief is £1.25m. This will reduce to £1m from 6 April 2016, and after that it will be index linked. If you think your pension pot may breach the new limit in the future it is important to take action before 6 April to preserve the old limit.

If you wish to discuss any of these changes or take advantage of pension planning opportunities, please contact your financial advisor for more information. If you wish to consider additional tax planning strategies between now and the end of the 2015-2016 tax year please contact Lesley Stalker by emailing las@rjp.co.uk.