The 2009 Budget introduced the Government’s proposals to restrict higher rate tax relief on pension contributions from 6 April 2011. In the meantime, the Government introduced ‘anti-forestalling’ provisions, intended to stop excessive last-minute pension funding before the rules change in 2011. The pre-Budget Report announcement on 9 December 2009, extended the restrictions from 9 December 2009 so that anti-forestalling now includes anyone whose ‘relevant income’ is £130,000 or more (previously the relevant income threshold for anti-forestalling was £150,000).
From 6 April 2011, pension contributions from an employer will be taken into account in determining whether someone’s income is £150,000 or more. But anyone with income below £130,000, before employer contributions are taken into account, will not have their tax relief restricted. Although if this threshold is breached in either of the previous two tax years the anti-forestalling provisions will be triggered.
Assuming that relevant income for all three years is under £130,000, or can be kept below £130,000, there are a number of pension planning issues to be considered such as Salary Exchange, Maximising Personal Contributions & Employer Contributions. If you would like to discuss any of these matters further please do not hesitate to contact us.
(This article represents Stiles & Company Financial Services (Petersfield) Limited’ interpretation of the law and HMRC practice at this time. Tax assumptions are subject to statutory change and the value of any advantages depends upon your personal circumstances.)