I’ll save the best till the last, so let’s start with the annual allowance.
The amount you can contribute to a pension will increase from April 2023 to £60,000 per annum. This change will have a significant impact as it will greatly reduce the number of people who suffer annual allowance breaches. It will take a few years for everyone to benefit from the full impact, due to the carry-forward rules that allow you to use unused relief in the previous three tax years. The £60,000 will be from April 2023, but the £40,000 will remain in place for previous tax years. So by 2026/27, it will be possible to have a £240,000 allowance when taking into account carry-forward.
Annual allowance tapering
For those suffering from annual allowance tapering, where the amount you can contribute reduces to only £4,000, the news, although still positive, is only just. The tapering starts at £260,000, up from £240,000 and reduces to £10k, not £4k.
Now for the big one…
The big news is the removal of the lifetime allowance. A much maligned allowance, as arguably it taxes growth.
Many feared the loss of the tax free element of the pensions when coming to draw on the pension. This element has been preserved and will remain at £268,275, the current maximum level ( unless protection is in place). This change will come into play from April 2023.
The removal of lifetime allowance is likely to also impact inheritance tax planning, but more on this another day.
These pension changes should help alleviate some financial concerns facing our higher-pay bracket doctors and dentists regarding retirement planning. If any of these issues affect your retirement and tax planning, and you would like to talk it through with your adviser – do get in touch.
Will the removal of lifetime allowance benefit you? Let us know by adding a comment below.