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11 February 2016

Tax allowance changes

Changes to both the Annual Allowance and Lifetime Allowance will come into effect from 6 April 2016.  
Annual Allowance

T
he Annual Allowance is the amount you can save each tax year, across all of your pension arrangements, before tax is charged. For most savers this is £40,000 but from April 2016 the Annual Allowance will reduce below £40,000 if your ‘adjusted income’ is over £150,000.  ‘Adjusted income’ is explained further in the guide.  
If your taxable income is more than £110,000, you may be affected by this change and you need to work out your ‘adjusted income’. The changes are more likely to affect you if you hold or have held a Senior Ministerial post or have been an Office Holder at some point during the review period. Also, buying Added Years or Added Pension or paying AVCs all increase your pension accrual and could increase your chance of breaching the new limit.
 
Lifetime Allowance
The Lifetime Allowance is the amount you can build up in all of your pension arrangements (excluding the State Pension) over your lifetime before additional tax is charged.
From April 2016, the Lifetime Allowance will be reduced from £1.25 million to £1 million. Optional protections will be available, which may assist those affected by the reduction. 
You could face large tax bills if you exceed either the Annual Allowance or the Lifetime Allowance, so please take the time to learn more about the changes and how they may affect you by reading our guide.   

Annual Allowance and Lifetime Allowance guide
 

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