Introduction.

In the budget of April 2009, the chencellor cut the amount of higher rate tax relief payable on contributions made by those who have incomes over £150,000. This income limit was then reduced to £130,000 in the December 2009 Pre Budget Report. In order to be able to assess how much tax relief you can claim correctly you have to take into account your total annual income in the current tax year and the previous two (e.g. April 2008 - 2001).

You Should

1. Be able to contribute at least £20,000 gross this year into your pension and get tax relief of up to 50%.
2. If you've been making regular contributions (even if they are greater than £20,000) which were set up before 22nd April 2009 you can continue these contributions and get tax relief of up to 50%.
3. If you've been making lump sum contributions between the 6th April 2006 and 5th April 2009 then you can continue the sum of these contributions divided by three - up to a maximum of £30,000 and get up to 50% tax relief. If this amount is then less than£20,000, the limits in point one will apply.

For everyone else with income below £130,000 the rules have not changed.

As from April 2001 higher rate relief will be effectively tapered down for people with income more than £150,000, and will cease when income reaches £180,000.

If your income falls in the band £130,000 to £150,000 and you have been making regular monthly or quarterly contribution whcih you set up before 9th Decemeber 2009 you can continue to make these and get tax releif of up to 50%.

The rules regarding this area of pension planning have become extremely complex and professional advice should be sought before committing to any pension savings to ensure that you remain within the lifetime allowance, receive the tax relief to which you are entitled and to ensure that you dont breach the lifetime allowance.

Please contact us for further assistance.