News
Summer Budget: Govt cuts pension tax relief for higher earners
Chancellor George Osborne confirmed the measure during his summer Budget.
Currently, anyone earning more than £150,000 can pay £40,000 into a pension annually tax free.
However, from April 2016 the £40,000 limit will be progressively cut to a minimum of £10,000 once incomes exceed £210,000.
The new rules will affect around 300,000 individuals, according to the Institute for Fiscal Studies.
What to do
What are your options if you will be affected by the new rules?
If you fund your pension personally, then you have the straightforward choice of either reducing contributions to match their revised annual allowance or continuing to make pension payments at the current level and incur the effective marginal rate of tax on income received between £150,000 and £210,000.
However, the situation becomes more complicated if your employer funds some or part of your pension, says David Smith, financial planning director at Tilney Bestinvest.
“In the event they request their employer to cease making the payments, there is no guarantee that they will increase their salary by an equivalent amount,” he says.
“Indeed, given that employers would be subject to National Insurance contributions of 13.8% on salary, it is highly unlikely that they would opt to increase salary on a 1 for 1 basis.”
There are, of course, tax efficient alternatives to pensions.
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) are types of investment that offer 30% tax relief.
There are 0 Comment(s)
More than 80 Lloyds, Halifax and NatWest branches to shut: The full list
Two of the biggest high street banking brands have earmarked more than 80 branches to close later this year.
Borrowers stuck on 7% default rates as Land Registry backlog ‘beyond a joke’
Homeowners remortgaging their properties are coming off cheap fixes onto standard variable rates of 7% because...
How to get 7% interest without tying up your savings for years
You don't have to lock your money away for years to get above-average returns on your savings.
Ryanair jetting towards US flights for £10
Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...
Investing in car parks: a good vehicle for income seekers?
As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...
A quick guide to guarantor loans – in association with Guarantor Loan Comparison
Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...
Results round-up: Companies to watch this week
Mulberry and more will face the music this week.
Product launches of the week
Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.
Money Tips of the Week
© AE3 Media Ltd, Floor 7, Lincoln House, 296 - 300 High Holborn, London WC1V 7JH, Company.