Dreaded Special Annual Allowance Charge

Dreaded Special Annual Allowance Charge

Didn't find your answer?

I have a client who due to the fact that his income has been over £130k for the last two years is subject to these pension charge rules. I'm looking to see if someone can confirm or help me in the matter. The basics:

- income this year is £78,000
- net pension payment this year of £59,000 (so gross is £73,750)
- income in previous years are as follow: 2008/09 £170,000 and 2009/10 £110,000
- client is subject to the maximum contribution of £30,000 due to irregular contributions over past few years

From my understanding of the legislation, his excess pension contributions would be added to the £78,000 and as his total income is into the higher rate band, a pension charge of 20% on £43,750 thus creating an additional tax charge of £8750.

Is there ANY way of getting rid of this charge? Could we apply for a refund now and net it off the excess?

This special annual allowance charges is causing me a serious headache!!!

Replies (3)

Please login or register to join the discussion.

avatar
By blok
09th Aug 2011 10:33

.

there is no way around the charge.

I suggest you sit in a quiet room for a couple of hours.

have a look at hmrc manuals which are good at explaining it.

start here;

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM15100010.htm

good luck. 

I would say that with the figure provided the IFA who advised this should be feeling a bit guilty at the moment.

Thanks (1)
avatar
By cyrynpen
09th Aug 2011 11:42

Thanks

Urgh that is not the best news of the day!

Many thanks for your reply.

Thanks (0)
avatar
By cyrynpen
01st Sep 2011 16:37

Dragging this back up

Ok sorry to drag this back up but can I check one more thing....

Basic rate band is £37400 + £73750 = £111,150

So when I compare his income plus excess contributions (£115,275) to his basic rate band.... only approx £4k is into the higher rate as his BR band is increased by the contributions....

 

Is that right?

Thanks (0)