Pension Tax Relief – Use it or lose it 

There seems to be a more or less constant stream of changes to tax relief on pension contributions. The latest change is that from 6 April 2016, anyone with income above £150,000 will see their annual contribution allowance (currently  £40,000) reduced by £1 for every £2 of income above £150,000. So if you earn between £150k and £210k, your annual allowance will be tapered down from £40k to £10k. This means that if you earn above £210k your annual pension contribution allowance will be fixed at £10k.

There are a lot of commentators who believe that this change, or some other restriction on relief could be introduced early in the Chancellor’s Autumn Statement, on November 25th.  And this could mean there’s now a short window of opportunity for higher earners to maximise their tax relievable pension contributions for the current year.  For many therefore this may be the last chance to make sizeable pension contributions.

If this would be of interest to you there are three things to consider:

1. If you haven’t made any pension contributions yet this year, then think about arranging to make a pension contribution up to the current £40k maximum as soon as possible, and before the Autumn Statement on 25 November to ensure you take advantage of this year’s allowance.

2. If you made a contribution between 6 April 2015 and 8 July 2015 (the date of the last budget), then you can benefit from a one-off "top up" allowance. The top up gives you a further £40k allowance from 9 July 2015 to 5 April 2016, as long as the total for the full year doesn’t exceed £80k.

3. If you’ve already contributed up to your maximum for 2015/16, you may have unused allowances carried forward from the previous three years you can use.

You should of course take financial advice specific to your own circumstances before proceeding