TA X YEAR PLANNING 2021/2022 PENSION INVESTMENT CHECKLIST The Chancellor, Rishi Sunak, presented his second Budget on Wednesday 3 March 2021. Interestingly there were no major announcements in respect of pensions other than with reference to the individual pension Lifetime Allowance. The lifetime limit sets the maximum figure for tax relief savings that an individual can build up over their lifetime.
and interest do not count). This could be less than your annual allowance.
The Chancellor introduced legislation to remove the annual link to the CPI increases for the next 5 years. This means that the standard Lifetime Allowance will remain at £1,073,100 for the tax years 2021/2022 to 2025/2026.
• Pension contributions are currently subject to an annual allowance of £40,000. This is the maximum that collectively you and your employer can contribute per tax year without you having to pay tax on any of the contributions.
As we move into the new tax year, thought should be given to making the most of the tax reliefs and allowances which are available. What follows is a summary of the main points to consider. • When making personal contributions, your payments will attract tax relief at your marginal rate of income tax on gross contributions of up to 100% of your net relevant earnings (or £3,600 if more). Even non tax payers receive basic rate tax relief if the contributions are made for a pension operating relief at source such as a personal pension plan. • Personal tax relievable contributions are restricted to your net relevant UK earnings which are earnings from an employment or trade only (dividends, rental income 13 P R O S P E R I T Y N E W S L E T T E R
• If you have sufficient earnings, or if your employer is making the contribution on your behalf, you and your employer can use unused annual allowances from up to the previous 3 tax years, provided you have a UK registered pension in those tax years. This is known as carry forward. • If you don’t have any UK relevant earnings but are less than 75 years old and UK tax resident you can still contribute up to a maximum of £3,600 gross per annum, receiving tax relief at the basic rate (20%). The good news here is that you can also pay into someone else’s pension including your partner even if they don’t have earnings or a child or grandchild on the same basis.
