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Act fast to double your tax-free UK pension contribution

by Sable International | Sep 16, 2015
  • HM Revenue and Customs (HMRC) will be extending tax relief to high earners through a transitional allowance that enables them to double their pension contributions. This is a small relief ahead of the UK government’s restricting of pension contribution tax relief for high earners in the 2016/2017 tax year, as announced in the Summer Budget Statement.
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    How the transitional allowance works

    The 2015/2016 tax year, as far as pension contributions are concerned, will be made up of two “mini-tax years”. The first “year” runs from 6 April 2015 to 8 July 2015 (pre-budget) while the second runs from 9 July 2015 to 5 April 2016 (post-budget). 

    This means that all pension contributions before 8 July will be considered part of the first mini-tax year. Any contributions after that will be considered part of the second mini-tax year.

    This gives you the opportunity to receive tax-relief for an £80,000 pension contribution, instead of the usual £40,000, for the 2015/2016 tax year. 

    Here is a table that describes how your post-budget contributions could vary, depending on how much you paid into your pension prior to the Summer Budget Statement:
     

     

    Pre-budget contributions
    (06 April 2015 – 08 July 2015)

     

     

    Post-budget potential contributions
    (09 July 2015 – 05 April 2-16)

     

    £0

    £40,000

    £27,000

    £40,000

    £40,000

    £40,000

    £62,000

    £18,000

    £80,000

    £0

    Important considerations

    To take advantage of the transitional allowance, you need take note of the following:
    The maximum post-budget contribution you can make is £40,000. This is without taking the value of your pre-budget contributions into account.

    The usual tax-relief rules still apply and earnings for the tax year must match, or exceed, your income.

    If you are subject to the Money Purchase Annual Allowance, specific provisions have been made for you, which you can read here.

    These new provisions are complex and, in order to ensure that you make the most out of this temporary allowance, we strongly advise that you contact a Sable Wealth adviser.


    You can contact us on +44 (0) 20 7759 7519, you can also email our wealth team.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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