UK Budget announcement targets high earners
The UK Budget was announced on 11 March 2020 and while the emphasis centred on the unfolding challenges presented by coronavirus and Brexit, some announcements will impact globally mobile employees and potentially impact the tax cost of individuals working in the UK.
Pension allowances for high earners
The pensions annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a tax year. The annual allowance was £40,000 and for those on the highest incomes the allowance tapered down to a minimum of £10,000.
The annual allowance remains at £40,000. However, the tapered annual allowance thresholds will be raised by £90,000. This means that from April 2020 the threshold income level will be £200,000 so that individuals with income below this level will no longer be affected by the tapered annual allowance. However, for those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. Please note that this reduction will only affect individuals with a total income of over £300,000.
Where contributions to a foreign pension plan continue and tax relief may be available in the UK under a double tax treaty, assignees with income between £150 and £200k may now be able to claim more relief for pension contributions whilst higher earners may find that a portion of the annual contributions are subject to an additional charge. For employers with individuals working in the UK on assignment and who are tax equalised, this change may result in additional tax costs to the business. Employers should, therefore, review now how these changes may impact the relief available for pension contributions in particular in relation to assignees into the UK.
An increase was announced in the threshold for paying national insurance to £9,500 and increase in the employment allowance for employers NIC’s from £3,000 to £4,000. While more limited in scope, they do provide some relief.