issue: Winter 2016
Reduced annual allowance for high earners Some high income individuals will face a cut in the amount of tax-efficient pension saving they can make from 6 April 2016. The standard £40,000 annual allowance will be reduced by £1 for every £2 of 'adjusted income' individuals have over £150,000 in a tax year, until their allowance drops to £10,000. So someone with income of £210,000 would see their annual allowance cut by £30,000. But not everyone who fails the 'adjusted income' test will see their annual allowance cut. There's a second test which can help some people who are caught simply because pension savings exceed £40,000 in the tax year. So, even if their adjusted income exceeds £150,000, their allowance won't be cut if their ‘threshold income' is £110,000 or less for the tax year. Each test looks at an individual’s total income before tax from all sources as well as pension contributions made in that year.
Thomas Carroll Group PLC
t
029 20 86 95 31
Pendragon House, Crescent Road,
e
info@thomas-carroll.co.uk
Caerphilly CF83 1XX
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An individual's total income before tax from all sources could, for example, include: earnings from employment and/or selfemployment; pension income (State Pension or private pensions); dividend income; rental income; income from a trust; interest from savings. If you exceed your annual allowance in a year you won’t receive tax relief on any contributions you paid that exceed the limit and you will be faced with an annual allowance tax charge. If you anticipate having income in excess of £110,000 in the 2016/17 tax year you should contact us immediately for a review. There is still time to take action to avoid a potential tax charge.
Contact us If you wish to discuss the content of this brief in more detail please contact Louise Eedy directly on 02920 855 244 or e-mail ifa@thomas-carroll.co.uk
Why Thomas Carroll? We have the honour of being named ‘The Chartered Financial Planners of the Year1 by the Personal Finance Society – the body which grants Chartered status to IFA firms and individuals. Our title demonstrates the excellence, commitment to professionalism, training and development of our people which our clients and professional colleagues have come to expect from us.
Thomas Carroll Group PLC
t
029 20 86 95 31
Pendragon House, Crescent Road,
e
info@thomas-carroll.co.uk
Caerphilly CF83 1XX
w thomas-carroll.co.uk
We have recently been awarded Corporate Financial Planning Firm of the Year2 and Retirement Planning Firm of the Year3 by Bankhall Group, the UK’s largest distributor of financial services. Tax and legislation are liable to change. This information is based on our current understanding of UK law and HM Revenue & Customs practise and legislation we believe may apply in the future. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments. 1. 2.
Awarded by the PFS in 2009 Awarded by Bankhall Group in 2012 &2014
3. Awarded by Bankhall Group in 2010 &2011