Tapered Annual Allowance
Tapered Annual Allowance
In normal circumstances, you can make a gross pension contribution of up to £40,000 per annum and receive income tax relief assuming your earnings are high enough. However, since 6th April 2016 the pension annual allowance can be reduced down as far as £10,000 if your “adjusted income” is high enough. We are now obviously approaching the end of the first tax year in which this system has applied. However, the level of your tapered annual allowance may have been a mystery until now, the latter part of the tax year.
In determining the tapered annual allowance, there are two measurements that need to be considered – threshold income and adjusted income.
Threshold income
If threshold income exceeds £110,000 then adjusted income must be measured. The very broad definition of threshold income is gross income from all sources after deduction of certain allowances and reliefs such as trading