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Finance Act 2009, Cross Heading: Special annual allowance charge is up to date with all changes known to be in force on or before 29 August 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
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1(1)A charge to income tax, to be known as the special annual allowance charge, arises where—U.K.
(a)the total adjusted pension input amount for a tax year in the case of a high-income individual who is a member of one or more registered pension schemes, exceeds
(b)the amount of the special annual allowance.
(2)The individual is a high-income individual if the individual's relevant income for the tax year is [F1£130,000] or more.
Paragraph 2 makes provision for calculating the individual's relevant income. [F2Paragraph 16A makes special provision about cases in which the individual's relevant income for the tax year 2009-10 is less than £150,000.]
(3)Paragraphs 3 to 16 explain what is the total adjusted pension input amount.
(4)The special annual allowance is £20,000 (but subject to paragraph 17).
(5)But if, in calculating the total adjusted pension input amount of the individual for the tax year, a deduction is made in respect of—
(a)protected pension input amounts (see paragraphs 7 to 14), or
(b)a pre-22 April 2009 pension input amount that is such an amount by virtue of paragraph 16(3),
(or both) the special annual allowance is £20,000 less the amount of the deduction or, if the deduction is £20,000 or more, is nil.
[F3(5A)If—
(a)the individual's relevant income for the tax year (whether that is the tax year 2009-10 or a later tax year) would (apart from this sub-paragraph) be less than £130,000 if the reference in sub-paragraph (5) to a scheme made on or after 22 April 2009 were to a scheme made on or after 9 December 2009, and
(b)the individual's relevant income for the tax year 2009-10 is less than £150,000,
the individual's relevant income for the tax year is to be assumed to be less than £130,000.]
(6)The person liable to the special annual allowance charge is the individual.
(7)The individual is liable to the special annual allowance charge whether or not—
(a)the individual, and
(b)the scheme administrator of the pension scheme or schemes concerned,
are UK resident, ordinarily UK resident or domiciled in the United Kingdom.
(8)The special annual allowance charge is a charge at the [F4appropriate rate] in respect of the amount by which—
(a)the total adjusted pension input amount, exceeds
(b)the amount of the special annual allowance.
[F5For this purpose “the appropriate rate” is—
(a)0% in relation to so much (if any) of the chargeable amount as, when added to the reduced net income amount, does not exceed the basic rate limit,
(b)20% in relation to so much (if any) of the chargeable amount, as when so added, exceeds the basic rate limit but does not exceed the higher rate limit, and
(c)30% in relation to so much (if any) of the chargeable amount as, when so added, exceeds the higher rate limit.
In this sub-paragraph—
“chargeable amount” means the amount in respect of which the special annual allowance charge is charged, and
“the reduced net income amount” means the amount after taking step 3 in section 23 of ITA 2007 in the case of the individual for the tax year.]
(9)But where—
(a)the individual's total pension input amount under section 229 of FA 2004 (annual allowance charge) for the tax year, exceeds
(b)the amount of the annual allowance for the tax year (see section 228 of that Act and orders made under it),
the amount in respect of which the special annual allowance charge is charged is reduced by the amount of the excess.
(10)In calculating the individual's liability to income tax for the tax year the amount of any income tax to which the individual is liable under this section is to be added at Step 7 of the calculation in section 23 of ITA 2007 (which applies as if this Schedule were a provision listed in section 30 of that Act).
(11)The amount in respect of which the special annual allowance charge is charged is not to be treated as income for any purpose of the Tax Acts.
Textual Amendments
F1Word in Sch. 35 para. 1(2) substituted (with effect in accordance with s. 48(7) of the amending Act) by Finance Act 2010 (c. 13), s. 48(2)(a)
F2Words in Sch. 35 para. 1(2) inserted (with effect in accordance with s. 48(7) of the amending Act) by Finance Act 2010 (c. 13), s. 48(2)(b)
F3Sch. 35 para. 1(5A) inserted (with effect in accordance with s. 48(7) of the amending Act) by Finance Act 2010 (c. 13), s. 48(4)
F4Words in Sch. 35 para. 1(8) substituted (with effect in accordance with art. 1 of the amending S.I.) by Special Annual Allowance Charge (Variation of Rate) Order 2010 (S.I. 2010/572), art. 2
F5Words in Sch. 35 para. 1(8) inserted (with effect in accordance with art. 1 of the amending S.I.) by Special Annual Allowance Charge (Variation of Rate) Order 2010 (S.I. 2010/572), art. 2
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