Tax Year End Planning: Pensions

Higher Rate (50%) Tax Payers: Tax Relief on Pension Contributions could be at risk. 

Recently, there has been much comment regarding the potential alteration to Higher Rate Pension Tax Relief.

To be on the safe side it might be an idea to ensure all top-up pension contributions for this tax year are processed before the next Budget is announced on Wednesday 21st March 2012.

So, if you typically make a year-end top-up contribution to your pension and you are a higher rate taxpayer (gross income over £150k)…………

***** Make Tuesday 20th March 2012 your Tax Year End *****  

 

Carry forward pension rules change – use your 2008/2009 allowance now.
5th April 2012 marks the last chance to pick-up any unused 2008/2009 allowance. If you wish to make aggregate gross  contributions (including employers’) into your pension of more than £50,000 this tax year, then utilise carry forward. Don’t lose the past allowance from  2008/2009 pension annual allowance in your carry forward calculations. 

 

Lifetime Allowance (LTA) and Fixed protection
If you believe your pension may be greater than the new reduced £1.5m LTA value coming April 6, 2012 when you come to take benefits, you should act now. By applying for fixed protection by 5th April 2012 you can retain an LTA of £1.8 million, and protect your pension from future excess tax charges.  Final Salary pensioners would multiply their expected pension figure by 20 and add any cash lump sum in calculating whether they risk breaking the limit. The LTA is not due to be increased for some time, it is rumoured.

 

Self Assessment Deadline and penalties – 2 days grace

HMRC have announced that they won’t impose late filing penalties on taxpayers who file their Self Assessment up to February 2nd this year, i.e. up to two days late. The announcement has been made amongst fears that some taxpayers would not be able to get through to HMRC’s call centres on 31 January 2012 where strike action by some employees has been threatened. People who need to call in for last minute help or advice could be disadvantaged without this deadline extension.

In HMRC’s words:

‘The Self Assessment deadline remains midnight on 31 January. But HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No customer will have to pay interest on payments due on 31 January that are paid on 1 or 2 February.

This gives a welcome respite to those who habitually leave things to the last minute and then struggle to file online on the evening of the 31st – while the HMRC system creaks and groans and freezes up, leaving one wondering if the Return actually got fully uploaded or not. Not that I leave it that late of course – I fully intend to file mine by late afternoon at the latest.