Finance Act 2004

227 Annual allowance charge U.K.

(1) A charge to income tax, to be known as the annual allowance charge, arises where—

(a) the total pension input amount for a tax year in the case of an individual who is a member of one or more registered pension schemes, exceeds

(b) the amount of the annual allowance for the tax year.

F1 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The annual allowance charge is a charge at the [F2 appropriate rate] in respect of the amount by which the total pension input amount exceeds the amount of the annual allowance.

[F3 But see section 227A (individuals who meet flexible drawdown conditions).]

[F4 (4A) The appropriate rate is—

(a) the basic rate in relation to so much (if any) of the excess as, when added to the individual's reduced net income for the tax year, does not exceed the basic rate limit for the tax year,

(b) the higher rate in relation to so much (if any) of the excess as, when so added, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, and

(c) the additional rate in relation to so much (if any) of the excess as, when so added, exceeds the higher rate limit for the tax year.

(4B) The individual's reduced net income for the tax year is the amount after taking Step 3 in section 23 of ITA 2007 in the case of the individual for the tax year.

(4C) Where the basic rate limit or the higher rate limit for the tax year is (in accordance with section 192 of this Act or section 414 of ITA 2007) increased in the case of the individual, the references to the limit in subsection (4A) are to the limit as so increased.]

(5) That excess is not to be treated as income for any purpose of the Tax Acts.

F5 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5 (5B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The following sections make further provision about the annual allowance charge—

• section 228 (annual allowance),

• section 229 (total pension input amount to be aggregate of pension input amounts for pension input periods ending in tax year),

• sections 230 to 237 (pension input amounts),

• [F6 sections 237A to 237F (persons liable to charge),] and

• section 238 (pension input period).

(7) Schedule 36 contains (in Part 4) transitional provision about the annual allowance charge.

Textual Amendments

F1 S. 227(2)(3) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 3(2)

F2 Words in s. 227(4) substituted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(3)

F3 Words in s. 227(4) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 45(1)

F4 S. 227(4A)-(4C) inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(4)

F5 S. 227(5A)(5B) omitted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 17 para. 3(5)

F6 S. 227(6) entry inserted (with effect in accordance with Sch. 17 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 17 para. 3(6)

Modifications etc. (not altering text)

C1 S. 227 modified (6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 8

C2 S. 227 revocation of earlier affecting provision S.I. 2006/207, reg. 8 (with effect in accordance with reg. 1(2) of the amending S.I.) by The Registered Pension Schemes (Miscellaneous Amendments) Regulations 2011 (S.I. 2011/1751), regs. 1(1), 12(2)

C3 S. 227 modified (1.4.2012) by The Postal Services Act 2011 (Taxation) Regulations 2012 (S.I. 2012/764), regs. 1(1), 24; S.I. 2012/687; S.I. 2012/688; S.I. 2012/966

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284