HMRC have recently published an update to issues that affect pension scheme administrators and individuals who contribute to pension funds. Highlights of some of the issues raised are reproduced below:
Annual allowance charges for tax year 2014-15
Administrators are reminded that it is really important that scheme members who have exceeded the pension schemes annual allowance of £40,000 for 2014-15 declare this on their Self-Assessment tax return. The deadline for submitting the return is 31 January 2016 although those scheme members who want to submit a paper Self-Assessment tax return must do so by 31 October 2015.
Those members who have exceeded the 2014-15 annual allowance and do not have sufficient unused annual allowance to carry forward from previous tax years will have to pay a tax charge.
Tapered annual allowance
Scheme administrators and contributors are also reminded that from 6 April 2016, as part of the changes for the tapered annual allowance, all pension input periods must be aligned with the tax year, even if the member is not affected by the taper.
This measure will restrict pensions tax relief by introducing a tapered reduction in the amount of the annual allowance for individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000.
Taxation of lump sum death benefits PAYE
Death benefits paid to individuals will change to the recipient’s marginal rate of income tax from 6 April 2016.
Normal PAYE rules will apply to these payments.
Pension Flexibility – transitional period
The special temporary rules have allowed individuals to take their pension commencement lump sum tax-free before 6 April 2015 and the associated taxable pension before 6 October 2015, outside of the usual six-month time-limit.
This allowed individuals to delay accessing their pension until the provisions of the Taxation of Pensions Act 2014 took effect from 6 April 2015, providing them with more choice.
Many will have accessed their pension shortly after 6 April 2015 but please note that the extended period for individuals to access their pension after taking their pension commencement lump sum under these temporary rules expired on 6 October 2015.