Hi
If Pension contributions made through salary sacrifice i.e. employer contributions exceed the annual allowance then how does the annual allowance change get triggered? Does the pension company just send out letters if the £40k is breached? The pemsion company doesn't know the earnings if they are over 150k and hence a reduced annual allowance and the company probably doesn't have the expertise to forewarn. Is HMRC just relying on good old honesty through self assessment again to pick this up?
Thanks
MDK
Replies (10)
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First time I've seen 'contributions' shortened to 'conts'
At least I hope that's what happened....
It's income, not earnings.
Assessed via SA.
No doubt in a few years will be the next thing that HMRC looks at, as they'll know the majority of the details anyway. Rather like the HICB follow ups that they've made years after the charge came in.
I raised this previously. I have mentioned it in connection with various tax returns this year and have noticed that no one knows anything about it. So could end up like HICBC.
https://www.accountingweb.co.uk/any-answers/annual-allowance-for-higher-...
Agreed, particularly if you look at the fact that the tapering first came in, in 2016/2017. This means an awful lot of people would have fully utilised brought forward relief in 2018/2019 so 2019/2020 will be the year of the car crash. Hence why the poor unfortunate hospital consultants are currently saying that they can't afford to work and the Government are going to effectively pay their 2019/2020 tax bills on the pension for them.Thanks. I agree that it looks like an impending car crash.
Well a cash benefit has tax consequences obviously.
Well informed high earners with decent accountants may well take this action. In practice however most unrepresented taxpayers will not realise they have a problem until such problem rears its head months / years after the pension contributions have been paid.
But what about represented taxpayers? How much responsibility should accountants bear? We are going to update our tax return checklists to give us salary sacrifice and employers contributions but is it really the accountant’s responsibility to calculate the annual allowance each year? We would not usually get involved with pensions but have raised this with our higher earners.
I generally advise clients to push it back to their IFAs as they are often advising clients in 'real time' before the contributions are paid whereas we are often just seeing things after the event. Have had several clients thanking us for being pro-active and making this suggestion to them.
I do think that there will be a lot of people looking for someone to blame if / when something hits the fan and may well try to lay this blame on the accountancy profession.