11th March 2016 at 11:43am
The Annual Allowance is the maximum amount of pension savings you can make each year without facing a tax charge. But from April this year, the rules are changing – so make sure you know what’s going on so you can make the most of all your tax efficient savings opportunities.
What happens now?
At the moment the Annual Allowance is £40,000 (normally).
From 6 April 2016 the Annual Allowance:
- will no longer be £40,000 for everyone
- will depend on your level of income
- will be aligned to the tax year.
There’s also a special transitional allowance of £80,000 for the current tax year – this is capped at £40,000 for the period from 9 July 2015 to 5 April 2016. You can even carry forward any unused Annual Allowances from the previous three years to be used in the current year.
What about higher incomes?
There will be an Annual Allowance cut for higher incomes and depending on your total income, your Annual Allowance could drop to as little as £10,000 a year.
Will the changes affect me?
Let’s take a look and see. But remember, ‘income’ means your total income and can include interest, on savings, dividends and rental income.
What can I do?
With tax changes happening this April, it could be a good idea to make the most of all your tax efficient savings opportunities while you can – so find out more about the Annual Allowance changes and what you can do today.
If you think these changes might impact you then consider speaking to a financial adviser, they can assess your circumstances and will be able to help find a tax efficient solution that best matches your goals.
Laws and tax rules may change in the future. The information here is based on our understanding in March 2016. Personal circumstances also have an impact on tax treatment. Investments can go down as well as up. The information in this blog or any response to comments should not be regarded as financial advice.