The Treasury has invited comments by 17 March on revised draft clauses, to be included in the Finance Bill to be published at the end of this month, on a facility for meeting the new ‘annual allowance charge’ from the taxpayer’s pension benefits instead of current income.
The government has decided, in the light of the ‘strong preference expressed by the vast majority of respondents’ to a recent consultation, that where the liability is met from pension benefits, the tax should be paid at the point the charge arises rather than at the point the pension benefit crystallises.
‘The government expects most individuals and employers to adapt their pension saving behaviour to avoid incurring a charge by exceeding the annual allowance, and has put in place measures such as the carry forward of unused allowances to protect individuals further,’ the Treasury said.
However, it recognises the possibility that some people will trigger tax charges that ‘could be difficult to manage from current income’, particularly in the early years of the new regime.
‘This is expected to be most prevalent among high earners with long service in traditional, final salary defined benefit pension schemes, given the potential for uneven accrual in these schemes,’ according to a response document published on the Treasury website.
Consultation on ‘options to meet high annual allowance charges from pension benefits’ closed on 7 January. The government announced in October 2010 that:
from April 2011 the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000, and
from April 2012 the lifetime allowance will be reduced from £1.8 million to £1.5 million.
The Treasury has invited comments by 17 March on revised draft clauses, to be included in the Finance Bill to be published at the end of this month, on a facility for meeting the new ‘annual allowance charge’ from the taxpayer’s pension benefits instead of current income.
The government has decided, in the light of the ‘strong preference expressed by the vast majority of respondents’ to a recent consultation, that where the liability is met from pension benefits, the tax should be paid at the point the charge arises rather than at the point the pension benefit crystallises.
‘The government expects most individuals and employers to adapt their pension saving behaviour to avoid incurring a charge by exceeding the annual allowance, and has put in place measures such as the carry forward of unused allowances to protect individuals further,’ the Treasury said.
However, it recognises the possibility that some people will trigger tax charges that ‘could be difficult to manage from current income’, particularly in the early years of the new regime.
‘This is expected to be most prevalent among high earners with long service in traditional, final salary defined benefit pension schemes, given the potential for uneven accrual in these schemes,’ according to a response document published on the Treasury website.
Consultation on ‘options to meet high annual allowance charges from pension benefits’ closed on 7 January. The government announced in October 2010 that:
from April 2011 the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000, and
from April 2012 the lifetime allowance will be reduced from £1.8 million to £1.5 million.
