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Oct
27th

RESTRICTED TAX RELIEF By: Gordon

The government announced a number of tax legislation changes on 14 October 2010. The key points may be summarised as follows:

ANNUAL ALLOWANCE
With effect from 6 April 2011 the annual contribution allowance will be reduced from £255,000 to £50,000. This new limit will take immediate effect. Contributions paid prior to the 14 October 2010 will be unaffected by the new rules.

Any employer pension contributions in excess of the new annual allowance rules will be subject to marginal rate income tax at the employee’s highest rate. This will have significant consequences for some Final salary / Defined Benefit pension scheme members.

LIFETIME ALLOWANCE:
This will be reduced from £1.8 million to £1.5 million with effect from 6 April 2012. There is no suggestion that this limit will be indexed in future.

TAX RELIEF ON PENSION CONTRIBUTIONS
Tax relief at the individual’s marginal rate of income tax (up to 50%) will be available in respect of pension contributions up to the annual allowance threshold.

CARRY FORWARD OF UNUSED ANNUAL ALLOWANCE
With effect from 6 April 2011, it will be possible to carry forward any unused annual allowance by up to three years. The facility could be used to catch up on pension funding with up to £200,000 with full income tax relief.

PROVISION TO UNWIND PENSION SAVINGS
The government will consult further on how this might work in practice.

ANTI-AVOIDANCE RULES
The government is committed to introduce anti-avoidance rules when necessary.
If you require further guidance please contact Haxton (Chartered Accountants in West London). We can provide initial assistance and then refer you to one of our strategic partners in Financial Services.

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