A: The Annual Allowance for contributions to your pension schemes that can receive tax relief in any tax year has increased from £40,000 to £60,000. In addition you can add to this amount any unused Annual Allowance from the previous three years to give you your available Annual Allowance. If the available Annual Allowance is exceeded then the excess is subject to tax at your marginal rate.
The £60,000 Annual Allowance is reduced once your income exceeds a certain threshold. This threshold has gone up from £240,000 to £260,000. The Annual Allowance is reduced by £1 for every £2 over £260,000 down to a minimum amount of £10,000 (previously the minimum was £4,000).
If you are already drawing a pension then the maximum amount you can contribute into your pension that can still attract tax relief is capped by the Money Purchase Annual Allowance (MPAA). The MPAA has increased from £4,000 per year to £10,000 per year.
Finally, the Lifetime Allowance Charge has been removed. The Lifetime Allowance remains at £1,073,100 but funds taken that exceed this limit are no longer subject to the Lifetime Allowance Charge and are instead taxed at your marginal rate.
However, the maximum tax free lump sum you can take has been capped at 25% of the Lifetime Allowance or £268,725.
These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.
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Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.