Will it be this time?

As every budget approaches it is the habit of the British press to speculate on what might come up, and it is the habit of government departments to leak titbits all over the place. And for most of the recent budgets that I can remember one constant speculation has been that higher rate tax relief on pension contributions will be going.

So far, not so. But this year I sense a different air amongst the ‘speculatti’ (as I like to call them) and for once I am beginning to wonder if this time might be the time. Many are now wondering whether they should maximise their pension contributions whilst the chance to claim higher rate and additional rate tax relief is still with us.

But will the Chancellor allow a period of grace, say up to the end of the tax year? That would only allow three weeks to get the money in and with the complications of carry forward and this year’s pre-alignment and post-alignment tax year confusing matters further (more on that in another post),  some might cry foul.  So will he announce, but defer to April 2017? That would give investors more time to get matters in order, but it won’t help the Chancellor very much in his objective of reducing the amount of tax he’s relieving. So I fear that it will be another raised drawbridge and the last day to get higher rate tax relief will be budget day itself.

There is a further complication for high income earners. The tapered annual allowance, kicking in on 6th April, will reduce the level of allowable contributions by £1 for every £2 of income over £150,000. So anyone with a high income making large pension contributions, will find their ability to do so restricted next tax year, and they may wish also to consider topping up to the maximum now whilst the opportunity still exists.

Budget day this year is 16th March giving us four weeks to consider the options. For some the amounts could be considerable; if there is sufficient to carry forward and sufficient earnings to justify it, there could be as much as £81,000 of tax relief for the right person.

I suppose by writing this I have now joined the ranks of the speculatti, but if you would like to discuss this with us do please get in touch; but please don’t wait until Budget-eve!

Philip Chandler APFS, CFPTM, Chartered MCSI

Chair of Aspinalls Technical and Investment Committee


Update – 7 March 2016

Apparently not.

You may have seen in the news over the weekend that the Government has announced that there will be no moves in the Budget to restrict tax relief on pensions. So the speculators (and I fear I must now include myself!) were, as usual, wrong.

But this Chancellor is a master controller of rabbits in hats and who knows what breed will be pulled out this time. Fearful of getting it wrong again, the furthest I’m prepared to go now is to predict that there will be surprises, but offer no more than that. Let’s wait and see what next Wednesday brings.