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 F1where an individual who is a member of one or more registered pension schemes has a F2non-zero chargeable amount for a tax year.

F3(1A)

The chargeable amount F4... is to be determined in accordance with section 227ZA.

F5(2)

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F5(3)

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(4)

The annual allowance charge is a charge at the F6appropriate rate in respect of F7the chargeable amount.

F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(4A)

The appropriate rate is—

(a)

the basic rate F10... in relation to so much (if any) of the F11chargeable amount 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 F12... in relation to so much (if any) of the F11chargeable amount 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 F13... in relation to so much (if any) of the F11chargeable amount as, when so added, exceeds the higher rate limit for the tax year.

F14But subsection (4AA) applies in the case of a Scottish taxpayer F15and subsection (4AB) applies in the case of a Welsh taxpayer.

F16(4AA)

The appropriate rate for a Scottish taxpayer is—

(a)

where the only Scottish rate is the Scottish basic rate (the “SBR”), that rate, or

(b)

where there is more than one Scottish rate—

(i)

the SBR in relation to so much (if any) of the chargeable amount as, when added to the individual’s reduced net income for the tax year, does not exceed the Scottish basic rate limit (“SBRL”) for the tax year,

(ii)

the next highest rate after the SBR in relation to so much (if any) of the chargeable amount as, when so added, exceeds the SBRL for the tax year but does not exceed the rate limit for that rate for the tax year, and

(iii)

where applicable, any other higher Scottish rate in relation to so much (if any) of the chargeable amount as, when so added, does not exceed the rate limit for that rate for the tax year.

F17(4AB)

The appropriate rate for a Welsh taxpayer is—

(a)

the Welsh basic rate in relation to so much (if any) of the chargeable amount 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 Welsh higher rate in relation to so much (if any) of the chargeable amount 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 Welsh additional rate in relation to so much (if any) of the chargeable amount 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.

F18(4C)

Where—

(a)

the basic rate limit,

(b)

the higher rate limit,

(c)

the Scottish basic rate limit, or

(d)

any other Scottish rate limit,

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 subsections (4A) F19, (4AA) and (4AB) are to the limit as so increased.

(5)

F20The chargeable amount is not to be treated as income for any purpose of the Tax Acts.

F21(5A)

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F21(5B)

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(6)

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

  • F22sections 227ZA and 227B (chargeable amount),

  • F22sections 227C to 227G (supplemental provision for calculations under section 227B),

  • section 228 (annual allowance),

  • section F23229(1) (total pension input amount to be aggregate of pension input amounts for pension input periods ending in tax year),

  • F24section 229(2) to (4) (how to arrive at the pension input amount in respect of an arrangement),

  • sections 230 to 237 (pension input amounts),

  • F25sections 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.