Tapered annual allowance

Tax

Your pension annual allowance may be reduced if your ‘threshold income’ is above £200,000 and your ‘adjusted income’ is above £240,000 (your threshold income is just your regular income while your adjusted income is your regular income plus your pension contributions), as of 2020/21. Your annual allowance reduces by £1 for every £2 above £240,000 of adjusted income, until your annual allowance reduces to £4,000 which happens if you earn £312,000 or more.

The government is due to review the tapered annual allowance as it is causing some public sector workers to reduce working hours in order to avoid large tax bills.

See also our tax benefits of a pension blog post.

Changes to these amounts were recently announced in the March 2020 Budget. See also our the Spring Budget 2020 & your pension blog post.

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