Delay tactics

Pensions experts have cleared up confusion surrounding the taxation of employer pensions contributions under anti-forestalling measures announced in the Pre-Budget report – confi rming that employer contributions will not be taken into consideration until 6 April 2011, when higher rate tax relief is fully withdrawn.

In December’s PBR Alistair Darling announced that employer contributions must be included in the income calculations of those higher earners affected by the restrictions on pensions tax relief. But there was some ambiguity as to whether this change took immediate effect.

HMRC has confirmed that, while all employer contributions must be included from 2011 “for the purposes of anti-forestalling the income defi nition remains as before so it excludes employer contributions”.

The restriction of relief from April 2011 will apply to individuals whose income, including the value of any pension benefit funded by (or eventually funded by) an individual’s employer, is £150,000 or over. This will be subject to an income fl oor so that those with pre-tax incomes, excluding the value of any employer contributions, of less than £130,000 are unaffected.

Permalink