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Hospital doctors, GPs and other high earners are lobbying the government to amend the pension tax rules. The current system restricts tax relief on pension contributions meaning many high earners are paying overtime salaries back in tax.
The NHS Pension Service has alerted members of its pension scheme that they could receive a tax bill if their pension savings exceed limits set by HM Revenue and Customs (HMRC). These limits are known as the annual allowance, which is calculated each year. The lifetime allowance is calculated based on overall pension savings.
The normal annual pension allowance is currently £40,000 each tax year and limits the amount of pension contributions that qualify for tax relief. The limit covers the combined contributions paid by the taxpayer and their employer. A tapered annual allowance was introduced in April 2016 with the intention of reducing pension tax relief for high earners.
It applies to those with adjusted incomes of over £150,000 and threshold income in excess of £110,000. The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000 at £210,000. This is a complex calculation and we can help you plan to minimise the impact of the rules as the individual is taxable on the excess pension contributions over the annual limit.
For tax planning help please contact us on 01295 477 250 alternatively you can email [email protected]