Part 4Pension schemes etc

Chapter 5Registered pension schemes: tax charges

Annual allowance charge

227Annual allowance charge

(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)

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F1(3)

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(4)

The annual allowance charge is a charge at the F2appropriate rate in respect of the amount by which the total pension input amount exceeds the amount of the annual allowance.

F3But 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)

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F5(5B)

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(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),

  • F6sections 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.