TQOTW: Pension Annual Allowance

I have several Self-Assessment clients for whom I am concerned that the annual allowance charge (‘AAC’) is applicable but they have not received any statements from their pension schemes alerting them to the issue. What approach may I take to ensure that I’m correctly reporting the charge on the client’s tax return?

When we get calls to the advice line about the annual allowance charge, it often emerges that we can’t progress to discuss how the charge is calculated because the caller doesn’t have sufficient information from their client about pension inputs in the year.

The circumstances under which a pension scheme administrator must issue a statement to a scheme member are quite limited: broadly, that will only be where the member’s pension input amount for the tax year exceeds the annual allowance (reg. 14A SI 2006/567 – see HMRC’s Pensions Tax Manual PTM167100). However, the scheme administrator is looking at one particular pension arrangement in isolation but the AAC applies when pension inputs across all registered pension schemes exceeds the available annual allowance. Also, since 2016/17 there has been a possibility that the full annual allowance is tapered down to as little as £10,000 if the taxpayer’s income is sufficiently high. Therefore, for either or both of these reasons, it is perfectly possible that someone’s total pension input amount has exceeded the available annual allowance without triggering an automatic issue of a pension input statement from any of the schemes of which she is a member.

Where someone is contributing a to ‘Relief at Source’ arrangement (where their contribution is treated as being made net of Basic Rate tax that is then claimed from HMRC by the scheme) information on those contributions will usually be handed over to the accountant as part of the process of preparing the Self-Assessment Tax Return because that will be needed to claim relief from higher rate tax. The information can then be used very easily to establish the pension input to those schemes as a result of the individual member’s contributions. However, where the pension scheme is set up differently (for example NHS superannuation or an employer’s defined benefit scheme) the pension input amount cannot be calculated based on the contributions made by the member into the scheme.

As a matter of good practice, you could build into your procedures for gathering information for the return, a request that your client puts in a request to the administrator (as provided for by Reg. 14B SI 2006/567 – see PTM167300) for each of their scheme to produce a statement of pension inputs annually so that all of the information is available before work on drafting the SATR begins, even if the conditions for an automatic issue of the statement have not been triggered.


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Tax Advisor
0844 892 2473


Julian began his tax career in a small firm dealing with the tax affairs of individuals and small business concerns. He has also worked for 5 years in corporate compliance at PwC. Julian is a member of the Association of Taxation Technicians

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