The availability of substantial tax relief for high earners is gradually being withdrawn through successive announcements.
In the summer budget it was announced that relief for pension contributions is to be restricted for those with income above £150,000 per year. We were told that this is intended to fund the increase in the inheritance allowance for passing on the family home.
The current £40,000 pension contribution annual allowance will be reduced by £1 for every £2 of income above £150,000 down to a minimum of £10,000 at £210,000.
Also, higher earners should remember that the pension lifetime allowance is due to be reduced from £1.25 million to £1 million from 6 April 2016 with transitional protection for those who already have pension savings above the new limit.
Going forward we believe that the 40% tax relief for higher earners will also be reduced so we encourage all clients to take advice on increasing their pension contributions over the next 6 to 18 months before further restrictions come into force.