HMRC issues further guidance on the pension changes announced at Budget
13 March 2020
HMRC’s Policy Impacting and Change Team has circulated further information relating to the changes to pensions that were announced at Budget, and the details can be located here.
The document provides further advice relating to the changes to the tapered annual allowance, and confirms that, if the taper applies to an individual, they will need to calculate their:
- Net income in the tax year 2020-21
- Pension savings in the tax year 2020-21
- Threshold income in the tax year 2020-21
- Adjusted income in the tax year 2020-21
Individuals will have a reduced or, ‘tapered’ annual allowance if both of the following are applicable in tax year 2020-21:
- Their threshold income exceeds £200,000 (this was previously £110,000)
- Their adjusted income exceeds £240,000 (this was previously £150,000)
Individuals won’t be subject to the tapered annual allowance if their threshold income for the year 2020-21 is £200,000 or less, regardless of what their adjusted income is.
For individuals who are subject to the tapered annual allowance, for every £2 of their adjusted income that exceeds £240,000, their annual allowance for that year will reduce by £1. The minimum figure that this could reduce to was £10,000 for tax year 2019-20 but will be £4,000 for tax year 2020-21.
There are a couple of examples provided, that help to illustrate how this works in practice.
For individuals who have made pension savings above their available annual allowance, they should include the excess figures on their Self Assessment return.
The team further advised that a summary of the changes announced at Budget would be included in the next publication of the Pension Schemes Newsletter, which is due for publication in the week commencing 23 March 2020. All associated Gov.UK guides will be updated in time for 6 April 2020, in line with the new tax year.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.