Call to end tax allowance taper as UK Autumn statement nears

Added 24th October 2016

After scrapping the secondary annuity market and potentially softening the non-dom tax changes, is the annual pension savings allowance taper the next thing that should go?

Call to end tax allowance taper as UK Autumn statement nears

T

Simon Nicol, pension principal at Thomas Miller Investment said he believes the current annual allowance taper should be axed.

“A good tax policy must be certain and fair. The annual allowance taper for high earners, under the current system, is neither,” he said.

The call comes as UK chancellor Philip Hammond begins the final preparations for next month’s Autumn statement where he will make his first formal announcement on the government’s new economic and fiscal policy since taking over from George Osborne after the Brexit vote.

Low key statement

Hammond has already indicated that his focus in the statement, due on 23 November, will be mainly on "modest, rapidly deliverable investments" on public infrastructure to help the economy.

In fact the Financial Times has speculated that the next Autumn statement may be Hammond’s last as he seeks to reign back the role of Treasury and focus all government spending and tax decisions on the annual Spring budget, usually held in late March.

However, while lowering expectations for any major announcements, the government has been active in winding back some of Osborne’s pet projects and tax moves.

Government moves

Last week the secondary annuity market was suddenly scrapped and, on the weekend, it emerged that the Treasury was considering watering down planned non-dom reforms due to come into effect next April.

Now comes a call to end the new and quite tough tax allowance taper which affects individuals with net incomes (excluding pension contributions) of over £110,000 ($134,492, €123,532) that only came into effect in April this year.

The taper reduces the annual tax free allowance, currently set at £40,000, by £1 for every £2 that the net income exceeds £110,000 up to a maximum reduction of £30,000, leaving a tax free contribution of just £10,000 for those on very high incomes.

Unfair rule

TMI’s Nicol argues the main reason to scrap the taper rule is that incomes can vary from year to year especially when bonuses are taken into account, making it difficult to predict the tax consequences for any fixed pension contribution.

“The government may wish to restrict pension contributions but if they do, they should do it in a manner that pension contributors can know at the start of the year what they can safely contribute without the threat of a double tax charge hanging over them.

“At Thomas Miller Investment, we support axing the annual allowance taper. Saving for retirement surely should be encouraged, not subject to a lottery of unforeseeable tax charges.

"The taper system and its unpredictable outcomes effectively exclude large numbers of workers from the pension system,” Nicol said.

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

Sponsors

Changes in the South African advisory landscape

Sponsored by Old Mutual International

Changes in the South African advisory landscape...

Wayne Sorour, head of Old Mutual International South Africa, talks to us about the changing landscape in South Africa and the Special Voluntary Disclosure Programme...

Square Mile Research

Fidelity Emerging Markets Fund
Fidelity Emerging Markets...

Talking Factsheets is a video service for users...

About Author

Richard Hubbard

Group Editor

Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.

Features

 Mike Webb on reviving Rathbones’ unit trust business post-Brexit

Mike Webb on reviving Rathbones’ unit trust business...

Mike Webb talks about his mission to revitalise Rathbones’ unit trust business and the impact of the UK’s decision to leave the European Union

Analysis

Profiles

Directories

Ashburton International
Ashburton International

Ashburton Investments is a new generation investment...

Tweets

Events

IA International Portfolio Bond Forum 2017
IA International Retirement Planning Forum Dubai 2017
IA International Retirement Planning Forum Dubai 2017

Thursday 15 March,
Shangri-La Hotel, Dubai

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...