If you are a member of a final salary pension scheme, the increase in your pension accrual on a year by year basis can result in an immediate tax charge. This arises if, and to the extent that, 16 x the annual increase exceeds £50,000. The excess is then charged to tax at your top rate, via your self assessment tax return.
Under a new rule, if this annual allowance charge exceeds £2,000 it can be paid, by election, by 31 July following the end of the tax year from the pension benefit rather than via the self assessment tax return. If it is £2,000 or less there is the ability to pay the tax charge through the PAYE system so that effectively 1/12th is paid each month in the next tax year through the Notice of Coding.
Pension scheme annual allowance charge
News: May 2011
Pension scheme annual allowance charge
If you are a member of a final salary pension scheme, the increase in your pension accrual on a year by year basis can result in an immediate tax charge. This arises if, and to the extent that, 16 x the annual increase exceeds £50,000. The excess is then charged to tax at your top rate, via your self assessment tax return.
Under a new rule, if this annual allowance charge exceeds £2,000 it can be paid, by election, by 31 July following the end of the tax year from the pension benefit rather than via the self assessment tax return. If it is £2,000 or less there is the ability to pay the tax charge through the PAYE system so that effectively 1/12th is paid each month in the next tax year through the Notice of Coding.
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