Scottish taxpayers have different income tax rates from other UK taxpayers, but can save tax by making pension contributions. Particular savings are open to those earning over £50,000 where Child Benefit is reduced, or over £100,000 where personal allowance begins to be lost.

Individuals with ‘adjusted net income’ of more than £150,000 (and ‘threshold income’ of over £110,000) for a tax year have their pension annual allowance restricted. Employer pension contributions are taken into account, so using salary exchange in lieu of a company pension contribution is ineffective. 

Where an individual’s adjusted net income exceeds £150,000, their pension annual allowance is restricted (at the rate of £1 in every £2). The maximum restriction is £30,000, so with adjusted net income of £210,000 or more, the tapered annual allowance is just £10,000.

A taxpayer who does not use their pension annual allowance can carry it forward to the following year, allowing larger lump sums to be paid. On 6 April 2019 the pensions allowance for 2015/16 will be lost. This could result in the loss of £40,000 of pension contribution capacity. So, use it or lose it!

If you are in a final salary scheme, with growth in your pension in excess of the tapered annual allowance, you may incur income tax charges payable under self-assessment. Although you may be able to request that the tax charge be paid directly from the pension scheme, some pension providers will settle only part of the tax liability.

This leaves some tax payable by the individual, which can lead to very significant personal tax liabilities. If you are in this position, we would suggest speaking to one of our advisers.

Top tip: If you are in a final salary pension scheme with growth in your pension above the tapered annual allowance get in touch with one of our tax advisers now to plan for the tax liabilities you may incur. Forward planning can always soften the blow. And - make use of the annual pension allowance before 6 April 2019!

Read the next section of our tax planning guide: investments or return to the main page.

View our other services

Sharp minds meet at any of our 13 locations

Arrange a free consultation with the team now

Have a general enquiry? Get in touch.