High earners need to act now or risk tax bills
More employees could be hard hit by both the intended and ‘unintended consequences’ of lifetime allowance and tapering changes unless they take action now, warns Darren Laverty, Partner at Secondsight.
Radical changes to pension schemes being introduced by government from 6 April 2016 could leave high earners with unexpected and unwanted tax bills of up to £13,500.
From 6 April 2016, the annual allowance will be tapered from £40,000 for those with earnings of £150,000 or more down to £10,000 for those with income of £210,000 or more.
Income will no longer just be comprised of someone’s salary, it is ‘adjusted’ to include employer pension contributions or any other income including savings, bonuses or even an individual’s buy-to-let property rental – taking many more people into a higher earnings bracket. The annual allowance will reduce by £1 for each £2 of adjusted earnings above £150,000 until it reaches £10,000.