High Rate Tax Payers and Pensions (2) – If you recall our previous blog which stated that if you are a high rate tax payer you should consider making the maximum pension contribution prior to the budget on the 8th July.
In the budget the chancellor however merely restricted annual allowances for Additional Rate Tax Payers, this will be done on a tiered basis for earnings between £150,000 and £210,000, so for client earning the topside of that could see their annual allowance reduced to only £10,000 (rather than the normal annual allowance of £40,000).
The Chancellor also launched a consultation process (a new Green Paper on Pensions) about reforming tax incentives for pensions, including the possibility of scrapping all tax relief on pensions.
Considering that tax relief on pensions cost a staggering £50Bn in 2013-14 and that more than two thirds of this tax relief went to higher rate and additional rate tax payers. Then it is clear pension tax relief system is manifestly geared in favour of the rich.
So much for the “One Nation” alluded to by Mr Osborne!
Given that we have a reforming Chancellor who is prepared to consider all strategic options, particularly when it means more cash for the government. If you have in the past made use of large pensions contributions and you are a high rate tax payer. Then we can only repeat our previous advice – for all high rate tax payers – consider making the maximum possible pension contribution to your pension prior to April 5th 2016. Quite simply you would be bonkers not to do so!