Section 49: Annual Allowance: New Annual Allowance for the Tax Year 2014-15 and Subsequent Tax Years
Summary
1.Section 49 amends Finance Act 2004 as it relates to the annual allowance for UK tax relieved pensions which is lowered to £40,000 from 2014-15 onwards.
Details of the Section
2.Subsection 2 amends section 228(1) to reduce the level of the annual allowance to £40,000 from 2014-15.
3.Subsection 3 amends section 228(2) so that the power to vary the level of the annual allowance can only apply for 2015-16 and subsequent tax years.
Background
4.Individuals can save as much as they like in a registered pension scheme subject to overall limits on the amount of tax relief their pension savings can benefit from. These limits are the lifetime and annual allowances. The Government announced on 5 December 2012 that tax relief for pension savings was to be restricted through a reduction in the lifetime and annual allowances.
5.Section 3 reduces the level of the annual allowance provided for in section 228 of FA 2004. The annual allowance is the maximum amount of pension savings for a tax year that can attract income tax relief. The level of the annual allowance is reduced from £50,000 to £40,000, which will reduce the amount of annual pension savings that benefit from UK tax relief.
6.The new level of annual allowance will apply for the tax year 2014-15 and subsequent tax years. This will affect pension contributions made in pension input periods that end in 2014-15. A pension input period usually covers 12 months and may end on 5 April each year or on other dates nominated by the scheme administrator or the individual.
