Tapered Annual Allowance for higher earners
From the tax year 2016/17 the annual allowance (AA) is tapered for members who have a ‘Threshold Income’ in excess of £110,000, and ‘Adjusted Income’ in excess of £150,000.
For every £2 that your Adjusted Income exceeds £150,000, your AA is reduced by £1 (to a minimum of £10,000).
Threshold income includes all sources of income that are taxable e.g. property income, savings income, dividend income, pension income, social security income (where taxable), state pension income etc.
You are not allowed to deduct from taxable income any amount of employment income given up for pension provision as a result of any salary sacrifice made on or after 9 July 2015.
How does the taper work?
From 6 April 2016, the taper reduces the AA by £1 for £2 of adjusted income received over £150,000, until a minimum AA of £10,000 is reached. This means that from 6 April 2016 the AA for high earners is as follows:
|Adjusted Income||Annual Allowance|
|£150,000 or below||£40,000|
|£210,000 or above||£10,000|