The Next Pensions Tax Grab Is Underway!
The problem with pensions is the tax man ...
POSTED BY JONATHAN VOWLES ON 08/10/2019 @ 8:00AM
Did you know that you can inadvertently get a tax charge based on the amount you or your employer contribute to your pension?
The tax man is clawing back more and more tax due to pension contributions!
copyright: fizkes / 123rf
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.
"If the restrictions catch you, then this costs money!"
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.
"From £200m a few years ago to
over £1bn estimated for 2019!"
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:
individuals who receive a pension and who are still contributing to another pension pot
People who earn in excess of £150,000
People who are in an occupational or final salary pension scheme who then get a pay rise or who are higher earners already ... and especially high earners who get a payrise!
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. If you'd like to find out more do give me a call on 01234 752 566 or click here to ping me an email and let's see how I can help you.
Until next time ...
More about Jonathan Vowles ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas, which can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.
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