HMRC reveals pension allowance breaches
27th September 2019
The amount of savers who were taxed for exceeding the pensions annual allowance in 2017/18 is on the increase.
Figures published by HMRC showed that 26,550 people had pension contributions that exceeded the £40,000 annual allowance last year - up from 18,500 in 2016/17.
Unsurprisingly, the tax collected on behalf of the Treasury mirrored that trend, surging from £578 million in 2016/17 to £812 million in 2017/18.
The number of people who reported pension contributions that exceeded their annual allowance through self-assessment stood at just 230 in 2007/08.
That represents an 11,443% increase in the amount of people breaching the annual allowance over a decade.
Those affected faced potential tax charges of 40-45% on their savings if they fell into the higher-income thresholds.
The amount of tax-free pension contributions that could be made in 2017/18 stood at £40,000, but was 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 a minimum of £10,000.
Helen Morrissey pension specialist at Royal London, said:
"This is just the beginning and we will see more and more people being caught out by this overly complex regime as time goes on."
Speak to us about the pensions annual allowance.