From the tax year 2011, those people whose income is £150,000 or more will receive reduced tax relief on their personal pension contributions. But instead of a ‘Cliff Edge’ the reduction in tax relief will be on a sliding scale, so those who earn £180,000 or more will receive only 20% tax relief. People whose income is between £150,000 and £180,000 will receive tax relief of between 50% and 20%. We believe their tax relief will be reduced by 1% for each £1,000 of income above £150,000.
HMRC wants to introduce equality between those who personally pay contributions and those whose employers pay sizeable contributions. Therefore, it will also apply the restriction on tax relief for the highest earnings to employer contributions. As employees aren’t currently taxed on these contributions, the new rule could introduce an additional tax charge on employees.
These changes will become effective in April 2011.Schemes in future will have to let people know the value of their total contribution arrangements, this is straightforward. But for defined benefit schemes, the process of valuing the total contribution could be complicated. HMRC intends to consult with the industry over the next year on the best way of doing this.
It’s important to emphasise that pensions will remain a highly tax-efficient way of saving for the majority of people, and that these changes will only affect a small number of people. But the combination of these two tax changes will significantly reduce the appeal of pensions for the very highest earners in the UK.
These changes will prompt high earners to explore alternatives to pensions and will create a need for more sophisticated and bespoke financial planning. The time for looking at alternatives is now so if you would like an initial chat then please do not hesitate to contact Mohit Saini of ERC Financial Planning Ltd on 0151-227-4792.
Chartered Accountants Liverpool and Chartered Accountants Chester
HMRC & The Pre Budget Report
We have finally received word from the government as to the date for the pre budget report and we all wait with baited breath as to what gems Darling dreams up for us and the rest of the business world to deal with over the coming months. We are all aware that the treasury is finding money hard to come by, unless of course you happen to be a high street bank, so we expect tax to be increased across the board either by stealth or full disclosure. With an election due early next year it would seem logical that the current tenants may not wish to rock the boat too much but would this then be seen as weakness in dealing with the current economic position?…Only time will tell.
Needless to say our website will be updated for all adjustments in rates etc within a few hours of Alasdair Darling’s speech. We will forward the salient points on email as usual so watch this space.
As I’m sure we are all aware, HMRC is particularly aggressive in its attempts to collect tax liabilities currently for all the obvious reasons. However they seem to have the complete opposite approach to tax refunds due. Claims are taking anything between 6 -12 months to resolve in certain cases; phone calls and enquiries into refunds are taking over 30 days to be returned and our clients are frustrated to say the least.
The charter whereby letters and enquiries receive a response within 14 days seems to have been shelved. By contrast HMRC are dealing with the missed deadlines of taxpayers within days and issuing threats of distraint etc within weeks….this smacks of desperation and leaves the honest taxpayer feeling that there is one rule for one, and a whole different set for another. If anyone is suffering from a lack of response from HMRC within a reasonable timescale then we are suggesting that official complaints are made in writing to HMRC and even letters written to their local MP in attempt to receive a reasonable level of service.
Rant over for now but watch this space for the government’s hand reaching ever deeper into the taxpayer’s pocket on December 9th!!
Chartered Accountants Liverpool and Chartered Accountants Chester
Needless to say our website will be updated for all adjustments in rates etc within a few hours of Alasdair Darling’s speech. We will forward the salient points on email as usual so watch this space.
As I’m sure we are all aware, HMRC is particularly aggressive in its attempts to collect tax liabilities currently for all the obvious reasons. However they seem to have the complete opposite approach to tax refunds due. Claims are taking anything between 6 -12 months to resolve in certain cases; phone calls and enquiries into refunds are taking over 30 days to be returned and our clients are frustrated to say the least.
The charter whereby letters and enquiries receive a response within 14 days seems to have been shelved. By contrast HMRC are dealing with the missed deadlines of taxpayers within days and issuing threats of distraint etc within weeks….this smacks of desperation and leaves the honest taxpayer feeling that there is one rule for one, and a whole different set for another. If anyone is suffering from a lack of response from HMRC within a reasonable timescale then we are suggesting that official complaints are made in writing to HMRC and even letters written to their local MP in attempt to receive a reasonable level of service.
Rant over for now but watch this space for the government’s hand reaching ever deeper into the taxpayer’s pocket on December 9th!!
Chartered Accountants Liverpool and Chartered Accountants Chester
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