4. Annual Allowance

Question 1

Pension Inputs - what are they and what do they exclude?

Answer 1

All gross contributions, whomever from
Entered in to tax return as part of 
Excluding:
Fund growth
Contributions in tax year member dies
Contributions in tax year where benefits are taken as a result of member ill health

Question 2

What is Annual Allowance Charge (AAC)?

How is AAC paid?

Answer 2

It is tax on any excess contributions
Add AAC excess to ANI and charged at marginal rate
PAid as part of self-assessment unless >£2k and members pension savings for that tax year over the annual allowance
Member may elect for scheme to meet some of the charge ‘ scheme pays’

Question 3

Annual Allowance for 2015/16
What was pre-alignment?
What was post-alignment

Answer 3

Pre-alignment was 06/04/15 to 08/07/15 - £80k available with up to £40k unused available to carry forward to post-alignment period
Post-alignment was 08/07/15 to 05/04/16 - £40k less any amount over £40k used in pre-alignement period

Question 4

What is MPAA and when was it introduced

What is the Alternative Annual Allowance

Answer 4

£4,000 when flexible benefits are drawn - from 06/04/15
Alternative annual allowance is £36k (£40k less MPAA), OR
Tapered allowance less MPAA

Question 5

What is history of annual allowance

Answer 5

2006 - £215k
2010/11 - £255k
2011/12 - £50k (plus unused allowance form 3 prior years)

Question 6

How to calculate carry forward

Answer 6

Can use unused AA in prior 3 years
Must have been member of registered pension scheme at some point in those years
Must use up current year first
Does not need to have paid in to a pension or even have had any relevant UK earnings to carry forward the unused relief

Question 7

What is the tapered allowance?
What is net income?
What is threshold income?
What is adjusted income?

Answer 7

THRESHOLD INCOME (if < £200k tape not relevant)

NET INCOME (all income (not inc. income not taxed) less allowable deductions (professional memberships. trading losses) and net pay contributions PLUS
salary that has been sacrificed for pension contributions LESS gross amount of relief at source contribs by member LESS gross gift aid donations.
ADJUSTED INCOME = net income PLUS
Gross net pay contributions PLUS Employer input value