Recent figures published by Her Majesty’s Revenue & Customs (HMRC) have shown that the amount of money paid in pension tax charges by people who exceeded either the Annual or Lifetime Allowances have significantly increased since they were introduced in 2006.
In the 2016/17 tax year, £561 million was paid in Annual Allowance tax charges compared with just £2 million back in 2006/07.
It’s a similar story with the Lifetime Allowance, in 2016/17 this amounted to £102 million in tax charges - a 20-fold increase from the £5 million levied in 2006/07.
Commentators are attributing the cause of this substantial rise in tax paid over the last 10 years to the fact both the Annual and Lifetime Allowances have been significantly reduced over this timeframe.
What are the current limits?
The limits for the 2018/2019 tax year are £1.03 million in respect of the Lifetime Allowance and £40,000 in respect of the Annual Allowance. For people who have taxable earnings in excess of £110,000 per annum or have taken advantage of the ‘Pensions Freedoms’ introduced by the Government in 2015, the maximum they can save towards a pension will be further reduced.
If you believe you may exceed either of these limits you should consider getting financial advice. You can find details of appropriately qualified advisers in your area by visiting www.unbiased.co.uk.