I’m writing this tax year-end article on pensions on the cusp of a general election. Is it time to dust off the old ‘could pension tax relief be under threat’ line?
A quick spin around the main parties’ manifestos and nothing to see to suggest tax relief is under threat. Reform of the net pay anomaly and perhaps something with the tapered annual allowance, but tax relief as we know and love (?) it seems here to stay.
Which clients do you need to focus on at this busy time, running up to the end of the tax year?
Tax relief is available at an individual’s highest marginal rate on contributions up to 100% of relevant earnings (or £3,600 if higher). Tax relief is available only on individual or third-party pension contributions paid before the member reaches age 75. And tax relief is granted in the tax year the pension contribution is actually paid.
A quick reminder that Scottish taxpayers will pay the Scottish rate of income tax (SRIT) on non-savings and non-dividend (NSND) income. NSND income includes employment income, profits from self-employment (including sole traders and partnerships), rental profits and pension income (including the state pension). Similarly, from 6 April 2019, Welsh taxpayers have paid the Welsh Rate of Income Tax (CRIT (C for Cymru)) on NSND income.
Other tax and deductions such as corporation tax, dividends, savings income and National Insurance contributions will remain based on UK rules. This could mean the amount of income tax relief that can be claimed on pension contributions by Scottish and UK taxpayers may not be the same. For more information on SRIT and how this works in practice, please visit our facts page. For more information on CRIT and how this works in practice, please visit our facts page.