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New tax year pension tasks

Technical Article

Publication date:

01 May 2018

Last updated:

31 October 2018

Author(s):

Claire Trott

Now we are in the new tax year it will soon be possible to get a grip on what allowances are remaining from the 2017/18 tax year with regards to the annual allowance and to check pension contributions for the previous years.  

For those not subject to the tapered annual allowance it should have been possible to get accurate figures before the end of the tax year for any money purchase schemes and contributions but for those subject to the taper any small amount of taxable income will have an impact to the available annual allowance and therefore use of any carry forward from previous years.

Tapered annual allowance

As the tapered annual allowance is dependent on the client’s taxable earnings in the tax year in which the annual allowance is applicable then any late changes to estimates in earnings will have had an impact on the amount of annual allowance available. This will of course have a knock of effect to any available carry forward for future years. So, even if this isn’t relevant now, having the information to hand should it be needed in the future will save a lot of time and effort.

As we know bonuses are often paid in March just before tax year end and should this have been better than expected it may have pushed some clients into the tapered annual allowance, this small increase could have a significant impact on their pension savings so it is best to recheck any assumptions made.

Pension savings statements

For those who are lucky enough to be a member of a defined benefit scheme then it may still be months before any clarity can be gained on the subject of pension input amounts. To this end it is best to request a pension savings statement from all their defined benefit schemes as soon as possible. The deadline for a scheme supplying a pension saving statement is 6th October following the end of the tax year or three months following the request for a non-statutory statement. So by requesting it now the statement will issued alongside the statutory statements sent to those that have exceeded £40,000 pension input amount in the scheme. Schemes will not automatically issue statements for those subject to the tapered annual allowance because they may not know and this will save the rush at the point the information is crucial for self-assessment.

Tax relief

It should be remembered that whatever the client’s annual allowance it is only possible to pay personal contributions up their UK relevant earnings in the current tax year and gain tax relief. Should there have been any personal contributions paid that exceeded their UK relevant earnings in the previous tax year then now would be the time to consider requesting a “refund of excess lump sum”. This is one of the few times that a pension scheme can make a refund of a personal contribution to the scheme. The scheme will repay the 20% tax relief to HMRC and the client shouldn’t claim any higher rate relief on this refund.

Self-assessment

For anyone that is going to have an annual allowance charge for the tax year 2017-18 and doesn’t already do a self-assessment return they are going to need to register for one. This isn’t a particularly urgent thing to do now but it mustn’t be forgotten because details of any annual allowance charge must be submitted in this way. 

Conclusions

We often only think about things that need to be considered at the end of the tax year or went there is a tax deadline. However, by getting ahead of the game it can mean that things go a lot smoother at those times of potential stress.

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.