Pension Tax Relief for High Income Individuals

From 2011/12 once an individual’s taxable income reaches £150,000, higher rate relief on personal pension contributions will be restricted. Only basic rate relief will be available unless the individual is able to demonstrate a pattern of regular contributions in earlier years.

There are anti-forestalling rules which apply from 22 April 2009 to prevent higher rate taxpayers avoiding the new restrictions. These will restrict higher rate tax relief on pension contributions for individuals:

• whose income is £150,000 or higher in any of the years from 2007/08,
• who change their normal ongoing regular pension savings and
• whose total pension contributions exceed £20,000 per annum.

At the time of writing, “regular” is understood to mean at least quarterly, so that an individual who normally pays one annual pension contribution, typically just before 5 April, will no longer be eligible for higher rate relief if the contribution exceeds £20,000. It is therefore important to review your pension arrangements and consider whether there is any action you need to take.
 

May 2009