In our regular Q&A series, Kabita Tank, tax adviser at Croner Taxwise, considers the tax liabilities on pensions and the taper rules affecting the annual allowance charge
I have a client that has taxable income for the tax year ended 5 April 2021 of £230,000 of which rental income is around £23,000 and attracts relief for the mortgage interest payments. Their employer has made £15,000 contribution and they have also made personal contributions of £15,000. Would they get caught by the tapering of annual allowance charge?
What is the annual allowance?
The annual allowance is a limit on the amount that can be contributed to your pension each year, while still receiving tax relief. It is based on your earnings for the year and is capped at £40,000 (with the exception for 2015-16 that had transitional rules, detailed in PTM057100).
What is the tapered annual allowance?
