The chancellor Philip Hammond used his first autumn Budget to give some good news for pension savers. The lifetime allowance (LTA) which has been cut substantially since 2010-11 when it stood at £1.8million will rise modestly from the current £1million to £1.03million in April.
The allowance governs the amount which can be saved into a pension in total while still qualifying for tax relief. Excess pension savings above the limit can generate tax charges of up to 55 per cent. Although a minor rise, the news provided a welcome reprieve from the predicted cuts to pension tax relief.
With the severe reductions to the LTA limit in recent years, more professionals are being caught in the net. New figures reveal that HMRC gained an extra £36million from individuals breaching the lifetime allowance in 2015-2016 – an increase of 80 per cent on the previous year. Over the last five years, the revenue has tripled.
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.
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.
And yet, your tax liabilities could be minimised with careful planning.
To check your position, contact one of our advisers on 020 7636 7006.