RPSM15101010 - Technical Pages: Special annual allowance: £130,000 limit

This guidance only applies for the 2009-10 and 2010-11 tax years.

The £130,000 relevant income limit

The special annual allowance charge does not apply to everyone. It applies only to individuals with ‘relevant income’ of £130,000 or more. In practice this means individuals with:

• relevant income of £130,000 or more, and
• who have a total adjusted pension input amount in the 2009-2010 or 2010-2011 tax years that exceeds their special annual allowance.

The £130,000 relevant income limit for a tax year applies in respect of the amount of income that relates to the individual in that tax year, or in either of the previous two tax years. In practice, this means:

• for the 2009-2010 tax year

• • the special annual allowance will apply to individuals whose income is £130,000 or more in any of the 2007-2008, 2008-2009 or 2009-2010 tax years, and
  • who have a total adjusted pension input amount for 2009-2010 that exceeds their special annual allowance for that year, and

• for the 2010-2011 tax year

• • the special annual allowance will apply to individuals whose income is £130,000 or more in any of the 2008-2009, 2009-2010 or 2010-2011 tax years, and
  • who have a total adjusted pension input amount for 2010-2011 that exceeds their special annual allowance for that year.

Special provisions apply for individuals who have relevant income of less than £150,000 for the tax year 2009-2010 when the relevant income calculation is carried out using the individual’s income for that tax year. Where this occurs their income for the previous two tax years needs to be taken into account. If the relevant income calculation based on the individual’s income for any of those two previous tax years gives an amount of £150,000 or more their relevant income for tax year 2009-2010 is taken to be £150,000.

The practical effect of this special provision is that an individual who is so treated as having relevant income of £150,000 for the tax year 2009-2010 must use 22 April 2009 as the date for determining whether pension input amounts are protected for the purpose of the special annual allowance or not in the same way as for individuals whose relevant income is £150,000 or more for the tax year 2009-2010 when based on their income for that tax year. This would be the case for both the 2009-2010 and 2010-2011 tax years.

Otherwise, where the individual is not so treated as having relevant income of £150,000 for the tax year 2009-2010 (because the individual’s relevant income for the tax year 2009-2010 remains less than £150,000 whether based on the income for that tax year or any of the previous two tax years), the individual would use 9 December 2009 as the date for determining whether pension input amounts are protected for the purpose of the special annual allowance or not. In effect, in relation to the tax year 2009-2010, this date would apply where the individual has relevant income of £130,000 or more but less than £150,000. For the tax year 2010-2011 the date would still apply even if the individual has relevant income of £150,000 or more for that year when based on the individual’s income for the 2010-2011 tax year.