With over 2 months to run to the end of the tax year, there is ample opportunity to make full use of your annual pension contribution allowance. This is particularly pertinent this tax year for a number of reasons.
- A new Labour government could reduce tax relief on pension contributions.
Over the last 10 years there has been regular speculation that the Conservative government might reduce the tax relief available on pension contributions, particularly given that higher rate and additional rate taxpayers can benefit from more tax relief than basic rate taxpayers.
Whilst the Conservatives decided to leave this alone, it is entirely possible that Labour might not be so kind.
With a general election expected later this year, this is the last tax year that we can guarantee you will get full tax relief on your pension contributions regardless of your marginal tax rate.
- The annual pension allowance has been increased for the 23-24 tax year.
The government increased the annual pension contribution allowance for everyone from £40,000 to £60,000 with effect from 6th April 2023.
It is also possible to make use of unused pension contribution allowances from the 3 previous tax years.
You do though need to make sure that you have sufficient earned income in the current tax year to ‘frank’ your pension contribution, unless your pension contribution is being made by way of an employer contribution.
You also need to check that your total taxable income is not so large that it reduces the amount of annual pension contribution allowance available to you. If you have taxable income in excess of £200,000 you need to make sure that you understand the pension contribution allowance tapering rules or seek specialist advice before making a pension contribution.
- The abolition of the lifetime allowance tax charge allows those with protection certificates to contribute to their pensions again.
The lifetime allowance tax charge (which previously applied to pensions with a value over £1,073,100) was abolished for the 23/24 tax year. This means that anyone with a ‘protected’ pension value (called Enhanced, Fixed or Individual Protection) can start to contribute to their pension again, should they wish to do so, without losing the extra tax free cash amount conferred on them by their pension protection certificate.
If you have any questions about making pension contributions before the end of the 23/24 tax year, please get in touch with your usual RG or PFM contact.
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