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The higher tax cost of making pension contributions into a smaller pot.
KEY POINTS
- April 2006 saw the start of a prolonged period of change for tax relief on pension contributions.
- New rules result in beneficial tax treatment for passing pensions funds to future generations.
- The tapering of relief can result in unexpected liabilities.
- Calculating adjusted income and threshold income.
- Liabilities on excess contributions might be made by the pension scheme.
There was a time when tax relief for pension contributions used to be reasonably generous and a common feature of tax planning for individuals who had some spare cash and wanted to increase their pension pot while reducing their tax bill. In April 2006 ‘A Day’ saw a major overhaul of the pensions regime but it was still possible to make large pension contributions of 100%...
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