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Claire Trott: Tapered annual allowance bites again

The upcoming self-assessment deadline is causing fresh problems

As we approach the self-assessment deadline for the first time since the introduction of the tapered annual allowance, more issues are presenting themselves.

This just goes to show how taper is unworkable in the long term. Well, actually, just unworkable.

In many cases, it will not be until the client’s self-assessment return is complete or near complete that the actual level of annual allowance available for the last tax year will be known.

That is assuming they have the correct information from the pension scheme.


The calculations for the tapered annual allowance refer to income tax calculations in order to get the starting point of net pay. Although most of the figures should be available at the end of the last tax year, they were unlikely to be an exact figure at that point.

As we all know, people like to leave tax calculations as late as possible, so it may only be now that a client would have sufficient information for the adviser to help with annual allowance calculations.

Mark Devlin: Turning the annual allowance tax trap into tax relief

In addition to knowing the net income of the client, we also need the pension input amounts from the pension scheme. If the pension input amount was over £40,000 in a single scheme, the client should have received a pensions saving statement by 6 October at the latest.

However, should they be members of multiple schemes or just a single scheme where the pension input amount is less than £40,000, there is no requirement for the scheme administrator to send a statement. Of course, it is possible to request one, but if the client is not aware of this it could be a rush to get the information in time.

There are also some schemes that, even now, are unable to provide this information because of their complicated nature. For example, some parts of the NHS scheme where earnings calculations are complex may not provide them until later this year.

This can lead to estimates being made and an under or overpayment of the annual allowance charge. This is a concern because, if the client does not pay, there could well be late payment charges involved.

Paying the tax

The scheme pays rules gave most people a bit of breathing room when they were subject to the annual allowance charge. In most cases, it also meant those subject to the charge did not actually have to put their hands in their own pockets to pay it.

This may not always have been the most efficient way to pay the charge depending on the scheme, but at least it was an option to avoid having to find thousands of pounds in some cases.

Why HMRC should consider annual allowance refunds

The tapered annual allowance has reduced this option for many, particularly those in the most generous defined benefit schemes.

Legislation has not been changed to force mandatory scheme pays for those subject to a tapered annual allowance. It still only looks at the standard annual allowance, so, for many, it will mean at least paying that part of the charge applicable to the pension input amount between their tapered annual allowance and £40,000.

This could be a charge of up to £13,500, based on a fully tapered annual allowance for an additional rate tax payer. This is due by 31 January, as with other outstanding tax payments.

Even if the scheme was willing to pay this charge under the voluntary scheme pays option, because the scheme is not jointly liable for the payment it still needs to be paid by 31 January to avoid late payment charges.

This again will have ruled out this option for many, given the tight timescales to calculate the liability and get the scheme to process and make payments to HMRC on the member’s behalf.

Be prepared

There is very little that can be done about all the obstacles but being on top of all deadlines and knowing whether a scheme will offer voluntary scheme pays, including their internal deadlines for this, can make for an easier time next year.

Knowing if a client is likely to be subject to taper and requesting the additional information from the scheme in plenty of time should help them file all the correct information in time in order to avoid any additional late payment charges.

I hope HMRC deals with all of this in a practical way. In many cases, there is not sufficient detail available for the client to file the exact information or even in some cases know if there is an issue and tax charge to be dealt with.

I also hope this will become easier in the future but it seems unlikely unless the legislation is changed.

Claire Trott is head of pensions strategy at Technical Connection


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