By offseting relievable personal contributions made to pensions up to a maximum of £20,000, Skandia says individuals can receive higher rate tax relief on contributions of at least £170,000 rather than £150,000.
In the Budget, the Government introduced new rules that restrict higher rate tax relief on individual pension contributions with immediate effect. The new rules only apply to anyone who has relevant annual income of £150,000 or higher in the current or previous two tax years.
Therefore an individual with relevant income of £169,999 in this tax year whose relevant income in the two previous tax years was below £150,000 can make a relievable pension contribution of £20,000 and be deemed to fall below the £150,000 limit for the purpose of tax relief.
Skandia says it crucial to consider income received in the previous two years as well as this year as if relevant income was over £150,000 two years ago (2007 / 08) the person will be caught this year by the new rules.
It says if relevant income exceeded £150,000 in 2008/9 gift aid could be considered to bring relevant income below the relief threshold.
Head of tax and financial planning Colin Jelley says: “There are many people out there who can continue to benefit from higher rate tax relief including those whose income is higher than £150,000 and these people need to seek professional financial advice to determine how they can get maximum benefit under the new rules.”