Pre-Budget Report 2009: Summary of personal tax measures
- The Income tax personal allowances and tax thresholds have not been increased, as the RPI measure for September 2009 (on which indexation is based) was still negative. (PN02)
- The IHT threshold has been frozen at £325,000, reversing a previously announced increase to £350,000. (PBRN20)
- The CGT annual exempt amount has not been announced yet.
Continued...
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£130,000 or not
I do think the examples in the special annual allowance document are poor as they don't explain the position clearly enough. From PBRN18 we have (para 4) The income definition for the £150,000 threshold will include the value of employer contributions, and tax relief for those with income of less than £130,000 before the inclusion of employer contributions will not be restricted, so to reflect this a new floor of £130,000 will be introduced into the anti forestalling legislation. This of itself seems a bit tortuous. From the supplementary document it seems that the only point being discussed is the reduction of the limit to £130,000. No mention of employer contributions, so maybe the only real change is to reduce the limit? I wonder whether in fact the inclusion of the employer contributions in the income definition applies to the "new, new" rules - that is after 2011. Will have a bit of a read of that tonight. (edit - now confirmed that the inclusion of employer contributions as income relates to the post 2011 measures - so make your contributions now if you can!)
I have reviewed the examples above again and they correctly reflect the new £130,000 limit as the pre and post 9 December contribution reflects the second phased of the anti forestalling legislation. I have edited to include the tax year to make it clearer.
More on pensions
Having slept on this and thought it over more, I can see the logic works like this:
- We should include employer contributions as income (predictable otherwise the 2011 rules would be easy to circumvent)
- Oh dear, that means people drawing nil salary but with a big pension contribution could be caught - they might have to pay tax on nil income! We might have political problems with this.
- OK then we had better put a floor on it - let's say a modest £130,000. That means we will catch people near the £150,000 mark but not others. Politically they are still "rich" so that's OK then.
- Ah but then the crafty so and so's will pile money in now to get around the rules in 2011 so we had better bring them within the anti forestalling rules as well. Hence anti forestalling phase 2 - as before but substitute £130,000 for £150,000 and 9 December for 22 April.
So for the self employed at between £130,000 and £150,000 it is a difficult two years now, when they are effectively capped at £30,000 or level of previous regular contributions (£20,000 if regular & no more than this or annual and no more than this). But from 2011 they will once again be free to contribute up to the annual allowance so they are better off than their employed colleagues.
Pension contributions - anti forestalling
The examples at Technical Notes Pensions : Special annual Allowance" are all based on someone on an income of £140,000. It does not make clear if the £2,000 per month contributions are employers contributions or not. If not employers contributions I would not expect the person to be caught by the anti forestalling rules as their gross income is below £150,000.
the Technical release "Pensions - High Income excess relief charge" Draft regulations seems to make the position clear at 213B that their has to be gross income of £150,000 or more AND income excluding ers pension contributions of £130,000 or more.
But the examples do not seem to fit with this.
Have they reduced the limit to £130,000 or not???
Valerie Young Dodd & Co