BudgetMar 15 2023

Tapered annual allowance rises to £10k

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Tapered annual allowance rises to £10k
(Pexels/Joslyn Pickens)

The government has increased the minimum tapered annual allowance from £4,000 to £10,000.

In the documents which accompany the Spring Budget, the government outlined an update to the taper mechanism for the annual allowance, saying the minimum allowance after it has been tapered will jump to £10,000 from April 6, 2023.

Currently the highest earners see their allowance tapered to as little as £4,000.

The adjusted income threshold at which the allowance taper takes effect will also increase from £240,000 to £260,000 from April 6, 2023. 

The annual allowance is currently £40,000 for most people but today (March 15), the chancellor announced it would be increased to £60,000 with the lifetime allowance abolished completely.

President of the Pensions Management Institute, Sara Cook, said: “Having abolished the LTA, the government could have abolished the tapered annual allowance, which continues to be unpopular throughout the pensions industry and also among the general public. 

“As chancellor, Rishi Sunak changed the TAA thresholds to levels that only affect a tiny percentage of pension savers. The tax revenues gathered through the TAA must now be so small that its retention seems hard to justify. 

“The chancellor has missed an opportunity to abolish a measure that has few admirers.”