Claire Carey comments on 2020 Budget
On 11 March 2020, the Chancellor, Rishi Sunak, delivered the 2020 Budget
Claire Carey, partner, commented: “Having only been in office for a few short weeks the Chancellor, Rishi Sunak, delivered his first Budget. Alongside measures to shore up the economy, the NHS, and businesses during what are unprecedented times, the Chancellor also made a radical announcement on pensions tax.
To recap, currently higher earners whose “adjusted income” is greater than £150,000 a year are subject to the tapered annual allowance (TAA). Adjusted income includes all taxable income, so not just salary, as well as pension contributions (including an employer’s). The TAA works by reducing the usual standard annual allowance (SAA) of £40,000 by £1 for every £2 of income an individual earns over £150,000, subject to a maximum reduction of £30,000. However, anyone whose income is £110,000 or less falls outside of the TAA.
Designed to help alleviate pressures on essential services, both threshold income and adjusted income are set to be raised by £90,000. Going forward, this means that anyone earning below £200,000 will be unaffected by the TAA, and the TAA will now only kick in at £240,000. However, the Chancellor has gone even further, so that anyone earning over £300,000 may now be facing a TAA of just £4,000.
Whilst good news for many, for some, the potential to save into pension schemes on a tax efficient basis is now a far cry from the £255,000 standard annual allowance heyday.”