Did you know that you can inadvertently get a tax charge based on the amount you or your employer contribute to your pension?
Pensions are great, and most people just pay contributions into them and that's that. However, for some people, pension contributions are a real problem. The problem is that the amount you can pay into a pension is restricted.
Many people are finding that this isn't just a few pounds, but is a huge tax grab. What makes it worse is that this problem isn't apparent until an unwelcome brown envelope from the taxman arrives through your letterbox.
Go back 4 or 5 years or so, and this was a problem for only less than 5,000 people a year, but over the last couple of years, the number of people caught by the restrictions has increased hugely. 20,000 people in 2017, 26,000 people in 2018 and this number is expected to rise yet again to over 37,000 people this year. As the number of people caught by the tax charges increases year on year, so does the amount of tax collected.
It's an average of £38k per person per year in 2017/18! A colossal tax grab from those affected. We had one client whose tax bill turned out to be bigger than their annual salary.
What makes it worse is that this is a hidden tax charge. Often the individual concerned has no idea that the taxman is about to hit them with a huge tax bill. This is particularly a problem with occupational or final salary pension schemes such as teachers, doctors or other public sector workers.
Who needs to be worried? Broadly speaking, there are three groups of people that might be caught by HMRC's pensions tax grab:
If you are worried about, or caught by, the pension contribution restrictions then we can help demystify what is happening as well as help you with the tax returns. Call me on 01234 752 566 or leave a comment below and let's see how I can help you.