in Professional in Payroll, Pensions & Reward (CIPP)
Ian Neale argues the TAA must go
The disquiet among National Health Service (NHS) consultants and GP practice partners has forced ministers to pay attention to the tapered annual allowance (TAA), which the government admits could affect a third of senior NHS employees. The TAA applies to 'high-income individuals' for the relevant tax year: broadly the same class who were subject to the special annual allowance
for the 2009/10 and 2010/11 tax years (provisions which, ironically, were repealed by the incoming coalition government in 2010 because they were too complicated).
A member of a registered pension scheme with an income of over £150,000, including the value of any pension contributions, will be a high-income individual unless their income excluding pension contributions does not exceed £110,000 – the 'threshold income'. The income including pension contributions is referred to as 'adjusted income'.
The taper's effect is to reduce the individual's annual allowance (AA) by £1 for every £2 that the adjusted income exceeds £150,000 with a maximum reduction of £30,000. That is to say, whilst the AA remains at £40,000, all members of a registered pension scheme affected by the taper will have a TAA of at least £10,000. A person with an adjusted income of £210,000 or more will have the minimum TAA.
The calculations can be quite complicated: various deductions and add-backs might have to be factored in. Anti-avoidance rules apply so that any salary sacrifice, or flexible remuneration, arrangement set up after 8 July 2015 will be included for the purposes of the threshold income. . . .
01 Oct 2019 Read the full article