RPSM06200070 - Member Pages: Annual Allowance: The annual allowance charge?

The annual allowance charge

This guidance explains the annual allowance rules up to 5 April 2011. If you want to know how the annual allowance works after that date see the guidance at http://www.hmrc.gov.uk/pensionschemes/annual-allowance/index.htm.

The annual allowance charge is a tax charge on the individual; not the scheme administrator. It occurs when the total contributions and the increase in pension savings, the total pension input amount ( see RPSM06100040) over a period (the pension input period - see RPSM06100050) exceeds the amount of the annual allowance for the tax year.

Where the total pension amount exceeds the annual allowance a tax charge of 40% of the amount in excess of the limit will be levied.