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Tuesday
Aug242010

Income Tax Could Hit Twice For Those With Final Salary Pensions

Final salary pension schemes are becoming very thin on the ground nowadays.  And those workers who still have them look set to become victims of a change in the tax rules surrounding pensions by the government.

Those in charge of this area are looking to extend the tax relief rules to everyone with a pension scheme.  Full tax relief may sound like a good thing in the first instance.  But the qualifying amount for this new rule looks to be £40,000.  This will be the capped amount and it will be done to make pensions easier to understand for many people.

This part of the change will indeed be good in my opinion.  Many people are confused when it comes to pensions and how they personally will benefit from them.  Anything that makes them easier to understand has to be a good thing.

It does however mean that some workers will end up having to pay more tax on their pension arrangements.  The £40,000 limit for tax relief means that anything which goes above this amount will be liable to tax.  If your personal fund was worth £50,000 for example, you would still qualify for the relief on the first £40,000.  But the remainder of the fund would be liable for income tax.

Some have spoken out about this, saying that the double tax blow will be costly for some people.  The government wants to simplify things in many areas, including final salary pension schemes.  But in this particular case some people will be affected and they will be required to pay the extra tax on the surplus amount.

If you have any concerns about your own pension scheme, you may contact us here at St Matthew to find out more about your tax position.

 



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