Stand-out Q- non resident returns to the UK…

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SAT, 24 MAR 2018

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Question

A high earning individual has been non-resident for five years and has returned to the UK in the 2018/19 tax year to work. They were a member of their company’s defined benefit scheme before they left the UK. Their relevant UK earnings in this tax year are expected to be approximately £250,000 with adjusted income of £260,000. What is the maximum personal contribution they can make into a SIPP whilst enjoying full tax relief and not incurring an annual allowance charge?

Answer

As a deferred member of the final salary scheme, for the purposes of carry forward of unused annual allowance they are still deemed to have been a member of a registered pension in each of the previous three tax years prior to the current tax year. Presuming they haven’t been funding an arrangement under a registered pension scheme while non-resident, they will be able to utilise the full (unused) annual allowance from these years plus the current year’s.

In the 2018/19 tax year, the individual is potentially affected by the tapered annual allowance as their adjusted income is in excess of £150,000. If the adjusted income for the tax year is £210,000 or more, it will mean an AA of only £10,000 for that year. However, if they make sufficient enough personal contributions to reduce their threshold income to £110,000 or less, they will once again have the full annual allowance for 2018/19. If they are prepared to do so, the maximum contribution for 2018/19 tax year, including their carry forward, is £160,000 gross or £128,000 net.

Higher rate/additional rate relief being obtained through their tax return.

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