Treasury to review tapered annual allowance as dispute rumbles on

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The Treasury has announced it will review the tapered annual allowance for pensions, following calls to abolish it.

The amount of pension contributions that can be made tax-free in 2019/20 stands at £40,000 in most cases, but this is restricted for higher earners by the tapered annual allowance.

The taper applies to people with a taxable adjusted income of more than £150,000 and a threshold income over £110,000.

For every £2 of income an individual has over £150,000, their annual allowance is reduced by £1, down to £10,000.

The rules have caused unexpectedly high tax bills for some NHS professionals, who refused to take on extra shifts as a result.

In response, the Treasury said it will review how the tapered annual allowance supports the delivery of public services.

Chancellor Sajid Javid said:

“This Government has listened to concerns and will be reviewing the operation of the tapered annual allowance.”

Royal London welcomed the announcement, but argued the taper should be scrapped for people in all areas of work.

Steve Webb, director of policy at Royal London, said:

“A review of the tapered annual allowance is long overdue. It must be comprehensive and cover everyone affected by this absurdly complex taper, including in the private sector.

“The best solution by far would be outright abolition, even if this meant a slightly lower annual allowance across the board.”

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