A pay increase of £5,000 a year could lead to a surprising and unwelcome £2,000 increase in their income tax bill for many pension savers, according to the Daily Telegraph. The reduction in the annual pension allowance to a maximum of £40,000 a year in 2014 will mean that high earners in final salary schemes will often exceed the allowance and incur a tax charge of 40% on the excess.
Fortunately, the Chancellor has given savers time to adjust, and the ‘carry forward’ of the allowance means there is scope for avoiding the charge for a year or two at least. But to benefit from this you will need to plan in advance. Contact us for further advice.
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