High earners could face large tax bills if they fail to declare pension contributions on their 2018/19 tax returns, according to a report.
When completing self-assessment, taxpayers are asked if they have put any money into a pension scheme above the annual pensions allowance.
For most people, this allowance is £40,000 – but for every £2 of income above £150,000, a high earner’s allowance is reduced by £1 to give an alternative figure known as the tapered allowance.
The maximum reduction is £30,000, so additional-rate taxpayers who earned more than £210,000 in 2018/19 will see their tapered annual allowance reduced to £10,000.
Pension contributions that exceed an individual’s tapered annual allowance will be charged at the taxpayer’s marginal rate, usually 40% or 45%. (more…)