Pre-Budget Report – Pension tax relief – anti-forestalling measures
The Chancellor announced in his 2009 Budget speech that those on incomes of £150,000 or more would have tax relief on their pension contributions reduced from 6 April 2011. Further provisions (referred to as ‘anti-forestalling’ provisions) were also announced to prevent individuals gaining a tax advantage by manipulating income and pension contributions in advance of 2011.
HMRC have announced changes to the rules that will potentially affect those whose pre-tax income (as defined for these purposes) is £130,000 or more.The revised provisions will apply only to pension contributions made on or after 9 December 2009 and only where individuals:
– Change their existing pattern of pension contributions (or the way in which benefits are accrued); and
– Contribute more than £20,000 (in some circumstances £30,000) in the tax year.
In such cases, tax relief on the individual’s pension contribution will be reduced. In 2009/10 the relief is reduced by means of the special annual allowance charge of 20%. In 2010/11 the way the rules work is being changed so that the taxpayer will get relief at just 20%.
The tax charge will not apply to any normal, regular ongoing pension savings arrangements that were in place before 9 December 2009, whatever their value. It will apply only to additional contributions over and above those made on or after 9 December 2009.