Many high earners will benefit from the recent changes to pension tax rules. The onset of the new tax year may therefore be an ideal opportunity to review your allowances and, where appropriate, to maximise your investments for the future.
If you previously faced a taper of your annual allowance you may find the increased threshold means this is not the case anymore, and you have more to invest. Or you may need to potentially reduce your pension savings if you breach the new higher level.
Your annual allowance for pensions
The ‘annual allowance’ is the amount you can put into a pension in a given year tax efficiently. It currently stands at £40,000 gross for individuals. Yet while the goalposts have widened in favour of high earners, their allowance may still gradually reduce depending on their income.
Everyone can earn a certain level of income before their annual allowance begins to taper off. Before the 6th April 2020 these levels were twofold: