Global Employer Services Newsletter March 2020

Increase in annual pension allowance phase out limits

In the recent Budget, measures were announced that significantly increased the income levels at which the annual pension allowance is phased out from 6 April 2020.

Currently the threshold income, which is broadly net income before tax (excluding pension contributions), is increased from GBP 110,000 to GBP 200,000. The adjusted income, which is broadly net income plus pension accrual, is increased from GBP 150,000 to  GBP 240,000. The minimum tapered annual allowance is decreased from GBP 10,000 to  GBP 4,000.

As expats often receive additional allowances and payments as a result of their assignment, this was causing individuals who would normally be entitled to the full pension allowance to see some or all of this phased out. Where companies implement a tax equalisation policy this was having a knock on effect in terms of whether the additional tax cost should be borne by the employer.

This increase in the relevant thresholds should see far fewer expats having their annual tapered allowance phased out although diligence still needs to be applied to ensure calculations are correctly carried out where income limits do exceed the revised levels.

Andrew Bailey