So, for those subject to the tapered annual allowance this amount will be the tapered amount less £4,000, which means it will be somewhere between £6,000 and £36,000.
What to do about the TAA?
Deciding what to do will be down to myriad factors and a particularly individual decision but there are some key things to think about.
Many people make additional contributions to use up their annual allowance every year. It may be best to look forward when deciding on current contributions. If you are likely to become tapered in the next three years you may wish to have some unused allowance to carry forward to your tapered year.
Investment income is a big part of the income calculations. There are some run of the mill income tax planning techniques that can be used to reduce your investment income. Income producing assets can be assigned to a spouse with no tax issues so falling out of your income calculation. Alternatively, ensure you hold income producing investments within a tax wrapper such as a pension, Isa or insurance bond as the investment income within these wrappers is not included in the individual’s tax calculations.
Check whether an individual pension contribution could get you under the threshold income level. People with very high adjusted income could have threshold income at a level where an individual pension contribution could get you under the £110,000 and take the taper away.
Embrace the tax charge. Do not automatically assume breaching the taper is a bad thing. The net of tax benefits accrued may still be a good deal, especially where alternative options are limited. Tax is only bad if the net benefit is not worth it.
Les Cameron is head of technical at Prudential
