Wednesday, January 20, 2021
  • About
  • Advertise
  • Careers
  • Contact
Pension Changes
  • Home
  • Government Policy
  • Pension Changes
  • Pension Information
  • Pension Rights
  • Retirement Pension
No Result
View All Result
Pension Changes
Home Pension Rights

High earners face hefty tax bills on undeclared pension contributions

March 16, 2020
in Pension Rights
High earners face hefty tax bills
0
SHARES
3
VIEWS
Share on FacebookShare on Twitter

High earners face hefty tax bills on undeclared pension contributions

HMRC has flagged up to pension schemes that some employees may unwittingly be failing to report all their pension contributions on their tax return. The oversight could result in large tax bills in due course when the taxman catches up with them, warns Steve Webb, director of policy at Royal London.

Related posts

Pension Solvency Relief Gets Fresh Shot in Democratic Congress

Pension Solvency Relief Gets Fresh Shot in Democratic Congress

January 19, 2021
EU Court to Consider if an Irish Pension can be Exempted from a UK Bankruptcy Estate

Mind the Divorce Gap – Lexology

January 18, 2021

The problem occurs when higher-rate taxpayers fill in the pension contributions section of their tax return, which covers growth in their defined benefit pension rights as well as cash paid into defined contribution pots.

The form includes a question asking whether they have paid in money in excess of the annual allowance, which is the amount you can pay in and receive full tax relief. This should be reasonably straightforward for most people, but for those on higher incomes who may be affected by the tapered annual allowance (see box below) the rules become extremely complicated.

– Pension tax pain causing doctors to hang up their stethoscopes early

Webb says: “We’ve long suspected people are putting a zero there or leaving a blank because they don’t understand the question, let alone how to calculate the answer.”

Excess contributions over and above the annual allowance are taxed at 40% and 45% respectively for higher rate and additional rate taxpayers. Anyone with several years of undeclared excess contributions could be facing a tax bill of “tens of thousands of pounds” if the HMRC catches up with them, he adds.

In its latest monthly newsletter to pension schemes, HMRC says it knows “that scheme members are forgetting to declare details of their annual allowance charge on their self-assessment returns”.

The use of the word “forgetting” is extraordinary, Webb says, but it might indicate that HMRC will view non-declarations as genuine mistakes and take a relatively lenient line in regard to those scheme members.

He continues: “The shocking saga around the annual allowance for pension tax relief gets worse. We now have HMRC admitting that they know that people are forgetting to put information about their pension tax bills on their annual return. But filling in this tax return question requires individuals to understand the system, especially if they are affected by the tapered annual allowance.  

“Thousands of people could be set to face huge tax bills because they have innocently failed to declare this information on their tax return. HMRC needs to get to the bottom of how many people have failed to declare this information and contact them immediately. And the next government needs to radically simplify the tax relief limits, to avoid this sort of situation happening again.”

– Government’s independent tax advisers call for review of pensions tax taper

Pension contributions: how do annual allowance and the tapered reduction work?

The annual allowance is currently £40,000 a year, but this may be reduced or tapered if your ‘threshold income’ (your annual income before tax less any personal pension contributions and ignoring any employer contribution) is over £110,000.

If your threshold income is above £110,000, then the taper will kick in if your ‘adjusted income’ is above £150,000. Adjusted income is basically your total annual taxable income (including dividends, savings interest and rental income) before tax, plus the value of your own and any employer pension contributions.

If it is above £150,000, the annual allowance will reduce by £1 for every £2 that your ‘adjusted income’ exceeds £150,000. Once it exceeds £210,000 you have just £10,000 of annual allowance.

— High earners face hefty tax bills on undeclared pension contributions  to www.moneyobserver.com

Previous Post

FG’s Pension Liabilities Hit N494.12bn

Next Post

‘Tax trap’ pension rules to change in effort to halt NHS crisis | Society

Next Post

'Tax trap' pension rules to change in effort to halt NHS crisis | Society

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

RECOMMENDED NEWS

Delivering pension dashboards – FTAdviser.com

11 months ago
TPO upholds complaint against South Wales Fire & Rescue Service

TPO upholds transfer complaint against WTW and Lloyds Pension Trustees

1 month ago
State Audit criticizes Latvia’s retirement pension system’s costs for the state budget | Baltic News Network

State Audit criticizes Latvia’s retirement pension system’s costs for the state budget | Baltic News Network

8 months ago
State Pension 2020: All the changes coming into force next month explained

State Pension 2020: All the changes coming into force next month explained

9 months ago

FOLLOW US

  • 79 Followers
  • 27.6k Followers
  • 40.7k Subscribers

BROWSE BY CATEGORIES

  • Government Pension Policy
  • Pension Changes
  • Pension Information
  • Pension Policy
  • Pension Rights
  • Retirement Pension
  • Uncategorized

BROWSE BY TOPICS

2021 2021 Pensions auto-enrolment age 18 auto enrolment pension contributions 2021/22 auto enrolment rates 2020/21 auto enrolment rates 2021/22 cashing in pension at 55 cashing in pension calculator cashing in small pension pots CCP retirement check my state pension Disabled pensions drawdown employer pension contributions 2021/22 government policy examples uk list of government policies uk minimum pension contributions 2021 minimum pension contributions 2022 new state pension Pension age pension issues pension ombudsman pension plan pension regulator Pensions Advisory Service Pensions Brexit pension scheme uk Pensions outlook retirement 2 million scams scheme funding Single mothers pensions State Pension State Pension age state pension changes state pension forecast State Pensions State triple lock taking pension at 55 the pensions regulator Therese Coffey uk pension age UK State Pension uk state pension age what is government policy uk

POPULAR NEWS

  • Multiemployer pension reform not happening this year

    Multiemployer pension reform not happening this year

    5 shares
    Share 0 Tweet 0
  • Exit payment cap: Implications for the LGPS

    0 shares
    Share 0 Tweet 0
  • Public Service Pensions Update | October 2020

    0 shares
    Share 0 Tweet 0
  • NEST: More than a pension | Country Report

    0 shares
    Share 0 Tweet 0
  • Builders were not self-employed, rules employment tribunal

    0 shares
    Share 0 Tweet 0

Follow us on social media:

Recent News

  • Pension Solvency Relief Gets Fresh Shot in Democratic Congress
  • Further Insight Into Deductibility Of Collateral Benefits – Employment and HR
  • Beijing House Church Pastor Denied Pension Amid Ongoing Crackdown on Worship — Radio Free Asia

Category

  • Government Pension Policy
  • Pension Changes
  • Pension Information
  • Pension Policy
  • Pension Rights
  • Retirement Pension
  • Uncategorized

Recent News

Pension Solvency Relief Gets Fresh Shot in Democratic Congress

Pension Solvency Relief Gets Fresh Shot in Democratic Congress

January 19, 2021

Further Insight Into Deductibility Of Collateral Benefits – Employment and HR

January 19, 2021
  • About
  • Advertise
  • Careers
  • Contact

© 2020 Please contact us on partnership@pensionchanges.co.uk if you would like to reach our audience.

No Result
View All Result
  • Home

© 2020 Please contact us on partnership@pensionchanges.co.uk if you would like to reach our audience.