High earners could face large tax bills if they fail to declare pension contributions on their 2018/19 tax returns, according to a report.
When completing self-assessment, taxpayers are asked if they have put any money into a pension scheme above the annual pensions allowance.
For most people, this allowance is £40,000 – but for every £2 of income above £150,000, a high earner’s allowance is reduced by £1 to give an alternative figure known as the tapered allowance.
The maximum reduction is £30,000, so additional-rate taxpayers who earned more than £210,000 in 2018/19 will see their tapered annual allowance reduced to £10,000.
Pension contributions that exceed an individual’s tapered annual allowance will be charged at the taxpayer’s marginal rate, usually 40% or 45%.
A lack of understanding about how the tapered annual allowance works is having dire consequences for those affected, Royal London has claimed.
It suggests these complexities are resulting in some taxpayers being unable to answer how much money has been put into their pension scheme.
If you require assistance with your Tax Return, especially in respect of the declaration of your pension contributions, please contact us on 020 7330 0000.