Alan Suggett discusses 'Pensions saving after the 2016 Budget'
It’s not often that there are very strong predictions of what the Chancellor’s Budget intentions are – but this is not the case with the 2016 Budget.
The increasing number of employees who will be included in the Workplace pensions/Auto Enrolment regime will lead to a huge reduction in tax paid to the Exchequer, and so the Chancellor will be under pressure to compensate for this by increasing tax in other areas.
Changes to Pensions are very strongly predicted along the following lines
1) Reduction of tax relief on pension contributions– currently full tax relief is available, but perhaps a reduction to basic rate (20%) or perhaps even to nil.
2) Reduction in the Lifetime Allowance (this is the value of an individual’s pension fund) - already being reduced from £1.25 million to £1 million on 6th April 2016, perhaps a further reduction to £750,000 is in the pipeline.
3) Reduction in the Annual Allowance (the amount of tax relievable contributions into a pension fund an individual can make annually) – Annual Allowance Taper Relief will apply from 6th April, reducing the Annual Allowance from £40,000 to £10,000 for those who earn more than £210,000 pa
4) Reduction in the amount of cash which can be taken from a pension fund without tax payment (currently 25% of the fund) – perhaps a lower percentage, or maybe payment of tax on all withdrawals.
What would this mean for dentists?
For some, not a lot, for the higher earners a large increase in taxation, for higher earning self employed NHS practitioners a significant increase in hassle and uncertainty.
About the Author:
Alan is a Chartered Accountant and partner in UNW LLP chartered accountants. He is also a media officer of the National Association of Specialist Dental Accountants & Lawyers (NASDAL) as well as a member of the technical committee, and chair of the NHS Superannuation committee.
Posted by Gemma