HMRC data has revealed a significant increase in the total value of pension contributions exceeding the annual allowance, with more and more people falling foul of the complex rules and regulations.
The latest personal pension statistics, which cover 2017/18, show a staggering 26,550 people reported contributions exceeding the £40,000 annual allowance in their self-assessment tax return, with combined total contributions amounting to £812m, an average of £30,584 per person. Furthermore, over the past decade, the number of individuals reporting such a breach has risen dramatically, with just 230 people facing similar tax charges in 2007/08 when the annual allowance was £225,000.
The sharp rise in breaches can largely be blamed on a big reduction in the annual allowance in 2011 and the introduction of the tapered annual allowance in 2016, which added even greater complexity to the pension landscape. Indeed, unless government heeds industry advice and significantly simplifies allowance rules, the next few years are likely to see even more people caught out by the overly complex regime.
Here to help
As many people are discovering, a breach of allowances can be extremely costly. It’s therefore imperative to seek professional advice if you are unsure how pension allowances impact on you. And remember, we are always here to help.
If you would like to know more about the various pension allowances, click here.