New figures reveal that the government has increased the tax it collected from savers breaching the lifetime allowance by a substantial 80 per cent in the last year. Over the last five years, the revenue has tripled.
In 2015-2016, HMRC gained £36m from individuals exceeding the lifetime allowance (LTA), up from £20m in 2014-2015. In 2012-2013, LTA revenues were just £12m.
The lifetime allowance limits the amount which can be paid into a pension while benefitting from tax relief. It now stands at just £1million, down from £1.5million in 2012 and £1.8m in 2011.
Excess pension contributions above the LTA can attract tax charges of up to 55 per cent.
With the severe reductions to the LTA limit in recent years, more professionals are being caught in the net.
There are pension protection schemes which can restore previous lifetime allowance limits but they are often too complicated for many savers to use without proper guidance.
The fact remains that every middle to senior doctor is likely to breach the lifetime allowance due to the very nature of making pension contributions into the NHS scheme over a number of decades.
Do not walk blindly into this tax charge; your tax liabilities could be minimised with careful planning.
To check your tax position, contact one of our advisers on 020 7636 7006.