This is a brief summary of the proposed new rules for tax relief for pension contributions.
HM Treasury has now published proposed changes to the rules for tax relief on pension provision that were referred to in the June 2010 emergency Budget Statement.
The changes will apply from April 6 2011 and can be summarised as follows:
- the Annual Allowance will be reduced to £50,000 (from the current level of £255,000)
- tax relief will be available at an individual’s highest tax rate
- where an individual’s contributions to their pension exceed the “Annual Allowance”, unused allowances from the three previous years will be available to offset against the excess pensions savings
- the carry-forward will be available against an assumed Annual Allowance of £50,000 for the tax years 2008/9, 2009/10 and 2010/11
- the “Lifetime Allowance” for pension savings that have tax exempt status will be £1.5 million with effect from April 6 2012 reduced from the current level of £1.8 million.
HMRC is taking comments on the draft legislation to ensure that it delivers the government’s stated policy intent. The government will publish details in the Finance Bill 2011 which is due to published for consultation at the end of 2010.
