The Treasury has announced that the annual amount of tax-free income that savers can put into their pensions will be drastically reduced from £255,000 to £50,000 in April 2011.
At the same time it was announced that the lifetime allowance on pension contributions obtaining tax relief will fall from £1.8 million to £1.5 million from April 2012.
Bett Twiggs, tax manager at ASE, said: “These rules apply equally to all taxpayers, including high earners, and offer significant simplification to the existing pension rules.
“There is a simple cap on total annual pension contributions of £50,000 although it may be possible to exceed this cap in certain situations if there is unused allowance in the previous three years of contributions.”
The Treasury expect that these charges will raise about £4 billion a year which provides a solution that will help to tackle the deficit without affecting those individuals on low and moderate incomes.
“Although the changes are not as far reaching as originally thought, the reductions are still significant.
"Therefore, it is important that higher earning individuals review their level of pension contributions between now and the end of the tax year in order to maximise the tax savings available to them,” said Twiggs.
> For more information call Twiggs on 0161 493 1930.