Enable’s IFA’s in Bishop’s Stortford are here to help you to make the best of any changes to pensions and after years of speculation, it looks as if Chancellor George Osborne may this year on Wednesday 16th March (date of the next budget) reduce higher-rate tax relief for pension contributions or maybe do away with it altogether.
At the moment, taxpayers earn tax relief on their pension contributions at their highest personal marginal rate of tax; basic-rate (20%) taxpayers, a £100 pension contribution costs just £80 after £20 of tax relief, higher-rate (40%) taxpayers, a net £60 is needed to make a £100 contribution, with £40 in tax relief, additional-rate (45%) taxpayers, the net figure falls to £55, plus £45 in tax relief.
The speculation is that the Treasury want to end pension tax relief at the 20%, 40% and 45% rates, replacing it with a universal tax relief at a single, flat rate. If there is change surely the bottom rate has to be higher than 20% and lower than 40%. May have quoted 33% as the middle ground. This would of course mean that 40% and 45% taxpayers will be worse off, as they will lose valuable tax relief. But if tax relief rises from 20% to, say, 33% it will benefit 20% taxpayers
If you’re a basic-rate taxpayer or non-taxpayer, then it might make sense to sit await developments, maybe even delaying contributions but if you are a higher or additional rate payer you might want to bring contributions earlier. Enable’s IFA’s can help you work it out.
Source: The Independent
Issued by: Enable Independent Financial Life Planners • 25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 – Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE