We are rapidly approaching the end of the 2017-18 tax year, which finishes on 5 April 2018.
This means that there are only a few weeks remaining to ensure you and your clients have taken advantage of all the allowances and reliefs to which you are entitled. If you do not, you could pay thousands of pounds more tax than you are required to.
Amongst the most significant allowances and reliefs are those applied to pension contributions in the form of the Pension Annual Allowance. This currently enables you to make up to £40,000 in pension contributions tax-free each year.
If your earnings, including any employer pension contributions, have exceeded £150,000 this year and your income excluding pension contributions (unless paid as a salary sacrifice by your employer) is more than £110,000, your Annual Allowance will be reduced by £1 for every £2 you earn over £150,000, up to a maximum of £30,000. This means that your Annual Allowance will be as little as £10,000 if you earned more than £210,000 this year.
However, you may be able to offset this reduced Annual Allowance by using rules that allow you to carry forward any unused allowance from the last three years. Your pension statements will show whether you used your full allowances or not.
If you have taken money from any of your pension pots using flexible access rules for the over-55s in a previous tax year, your Annual Allowance this year will be £4,000. This is known as the Money Purchase Annual Allowance (MPAA). The MPAA cannot be topped up with any unused allowances from previous years and cannot be carried forward.
If you or your clients would like to make sure that all tax allowances have been fully utilised before the April deadline, get in touch with our experts now.