HMRC Tax Regime Basics

Question 1

What was the main objective of A Day?

Answer 1

Remove old legislation and introduce one simplified tax and regulatory regime

Question 2

A Registered pension scheme is what?

Answer 2

A pension that is subject to HMRC tax regime

Question 3

What happened to existing schemes post A day that had previous HMRC approval?

Answer 3

They were automatically transferred and treated as registered pension schemes

Question 4

The Pensions Act 2014 introduced 4 changes to pension legislation, what were they?

Answer 4

1. State pension to move to Single tier flat rate from old basic plus additional schemes
2. A new type of voluntary NI scheme 3A
3. Change in state pension age from 66 to 67 to be introduced between 2026 and 2028
4. Flexibility option introduced including Flexi access and UFPLS

Question 5

Contributions to a registered pension scheme can be made from 3 sources they are?

Answer 5

1. Individual
2. Employer
3. Third party on behalf of someone else

Question 6

A relevant UK Individual is someone who is under what age?

Answer 6

75

Question 7

What 4 criteria apply to enable someone to be a relevant UK individual?

Answer 7

1. Has relevant UK earnings chargeable to income tax for that year
2. Is resident in the UK at some point during that year
3. Was resident in the UK at some point in the 5 years leading up to the contribution and was a UK resident when they became a member of the pension scheme (limited to max contribution of £3,600)
4. They or spouse have have earnings from Crown employment overseas subject to UK tax

Question 8

If someone is not a relevant UK individual, can they still contribute to a pension?

Answer 8

Yes although they will be unable to claim tax relief

Question 9

There are 4 types of income classed as UK Relevant Earnings, what are they?

Answer 9

1. Employment income incl salary, wages, bonus, commission, overtime
2. Income from carrying on a trade (sole trader/Partner)
3. Income from Patent rights
4. Overseas crown employment subject to UK tax

Question 10

What type of income is not included in the definition of UK relevant earnings?

Answer 10

Dividends

Question 11

What two options are open to Directors wishing to increase their pension contributions but are taking large dividends and small salary?

Answer 11

1. Increase salary but suffer increase NI and income tax as a result
2. Make an Employer contribution from the company but must meet the ‘wholly and exclusively’ rules