Summer Budget 2015 – Yet More Pensions Tax Changes

Keywords: Summer Budget 2015, pensions, tax relief,

In this week's Summer Budget, the Chancellor announced a further raft of pensions tax changes, including implementation of the Conservative election manifesto pledge to reduce pensions tax relief for high earners. The Chancellor also announced a consultation on whether and how the pensions tax system should be reformed.

Tax relief for high earners

From 6 April 2016, tax relief on pension contributions will be reduced for individuals with "adjusted income" of over £150,000. This will be achieved by reducing the annual allowance by £1 for every £2 over the £150,000 threshold, down to a minimum of £10,000. "Adjusted income" is essentially income plus the value of any employer pension contributions. A further "baseline" threshold will apply whereby individuals whose unadjusted income (i.e. excluding employer pension contributions) is under £110,000 will not generally be subject to the reduced annual allowance.