Legislation that has been delayed by the call for the snap election in June means there is a “tax loophole” that some people are wondering whether they should exploit. The Finance Bill was delayed, and included changes to the rules about what happens after people have released money from their pension. Previously those people could still pay in up to £10,000 per year to their pension, but the changes would reduce that amount to £4,000 per year (people who have not yet accessed their pension pot will still be able to pay-in up to £40,000 per year, their situation is un-changed).
The Telegraph reports –
“This cut to the “money purchase annual allowance” was meant to apply from April this year, but has not yet been made into law… As a result, pension experts say a window has opened up that means savers could continue to benefit from the higher £10,000 allowance this year… Tax rules mean any pension contributions made above the annual or lifetime caps will face a charge in order to reclaim the tax relief that applies to pension contributions… Jennie Kreser, a partner at Silverman Sherliker, the law firm, said it would be “incredibly crass” of HMRC if it tried to charge savers who make contributions of over £4,000 this year… She said: “The law is what the law says and at the moment the law says £10,000, so that’s what you can put in… The issue is whether they make the law retrospective. I think if people make contributions in good faith on what they believe the allowance to be and put in £10,000 and then the Government tries to penalise them, there would be quite a fuss… I would support a campaign saying backdated legislation in these circumstances was highly undesirable and possibly illegal.”