It may seem a bit behind the times to be commenting on the Budget, now over two weeks’ ago – but as any accountant will tell you, the least reliable way to try and work out what’s in the Finance Bill is to listen to the Chancellor’s speech. In any case, I’ve been on paternity leave, so there.
Now then, if you will bear with me for a short technical bit, we come to the new provisions for pension contribution tax relief for the “rich”.
Until 22nd April, someone earning, say, £200,000 a year could put up to £200,000 into their pension fund that year and get tax relief at 40% – their marginal tax rate*. After 22nd April, of course, anyone earning more than £100,000 is a disciple of the devil and must be squeezed until the demons are exorcised (or emigrate). So from April next year, those on much more than £150,000 per year will only get 20% relief on their pension contributions – and that’s quite a loss (£40,000 on a £200,000 contribution).
So, suppose you were in the higher echelon of earners – say, an MP or maybe even a minister – and wanted to get in before the new rules come into effect. You might suddenly whack in a big lump sum into your pension now before the government shut the door.
But the Treasury has thought of that, and special rules came into effect from Budget Day to stop such “forestalling” measures. So that’s that. You’re stuffed.
Except …
You are, as I mentioned earlier, an MP. As it happens, you are a Labour MP and on the Monday, two days before Budget Day, you contact your financial adviser and put £400,000 into your pension – something you wouldn’t be able to do the following week without losing £80,000 in tax relief.
Not that you’re doing anything akin to insider trading – it was pure coincidence, of course.
And don’t let anyone tell you otherwise. Move along now, nothing to see here.
P.S. As that Labour MP, you will no doubt be aware that you can do the decent thing and get a refund of said contribution – though that might not stop the grubby details coming out….
* (Pedantic note: Technically they could put up to £245,000 if they have enough relevant earnings.)
Vir Cantium 