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Lambert Roper and Horsfield advises on changes to pension tax relief
Halifax-based chartered accountancy firm Lambert Roper and Horsfield (LRH) is advising people on changes to the amount of tax-free contributions they can make to their pension fund.
From April 2011, the Government will reduce the annual tax relief on pensions from £255,000 to £50,000. There will also be a reduction in the lifetime allowance on money that can be saved in a pension fund from £1.8 million to £1.5 million, although those affected will have an extra year to plan as this does not come into effect until April 2012.
Anyone with unused allowance from the last three tax years will be able to carry them forward if they were a member of a pension scheme during that period, meaning they will not have to pay the annual allowance charge on pension savings of more than £50,000 from those years.
The Government hopes the changes will save it more than £4 billion a year, which it will use to tackle the budget deficit.
Keith Lyons, a director at LRH, said: “While £50,000 is obviously a huge drop from the current limit of £255,000, it is certainly better than the previously predicted allowances of between £30,000 and £45,000.
“Another cause for celebration is the coalition Government’s rejection of the proposal to cap tax relief at 40 per cent.
“We would advise anyone regularly contributing more than £50,000 to consider making contributions up to the current annual allowance before the changes come into force next April. However, it is not possible to alter pension input periods (PIPs), and transitional rules apply for PIPs ending in 2011/12.”
For further information on the changes, or for advice on pensions and tax planning, please contact Paul Smith or Richard Mills on 01422 360788.