Features

Good news for pensions savers from HMRC

HMRC has withdrawn its appeal over breaches of the pensions lifetime allowance.

Winning at Poker

Thousands of pension savers may be spared an expensive tax bill now that HM Revenue & Customs (HMRC) has withdrawn its appeal in a landmark legal case. The dispute could have implications for as many as 12,000 savers who have breached the terms of protection they were granted against going over the lifetime allowance (LTA).

Under the current LTA rules, anyone with total pension savings of more than £1,055,000 pays tax charges on the excess when cashing in their pension. But thousands are entitled to higher allowances, having applied to HMRC to protect their pensions from tax following reductions in the allowance, most recently in 2016. Crucially, however, some forms of this protection are only available to savers who agree to make no further pension contributions or accept any additional contributions from an employer. Breaches may mean they lose the protection, or incur a tax bill.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

HMRC's tough line on this rule was last year successfully challenged in court by Gary Hymanson, who had been warned to expect a six-figure tax bill after falling foul of the system. After protecting his LTA at £1.8m, Hymanson forgot to cancel a standing order to one of his pension providers and made additional contributions as a result. Others who fell foul of the restrictions may now be able to avoid tax charges if they can show they made a genuine mistake, or if an employer has contributed on their behalf, for example. The principle established will also apply to those caught out in the future.

Seek specialist advice

The rules are further complicated by protection schemes offered to people in previous years when the LTA was cut; these affect the rights of savers applying for further protection. In practice, many people may need specialist financial advice to be sure of minimising their tax bill.

Advertisement

Recommended

Visit/513684/companies-cut-back-on-their-pensions-bills
Personal finance

Companies cut back on their pensions bills

Britvic is the latest firm hoping a cheaper inflation index will cut pension costs. David Prosser reports.
28 Aug 2019
Visit/502738/dont-miss-the-pensions-deadline
Personal finance

Don’t miss the pensions deadline

There are just five weeks left in the 2018-2019 tax year, so make sure you’ve made full use of your allowances.
6 Mar 2019
Visit/personal-finance/pensions/state-pensions/600781/how-much-extra-state-pension-you-will-get-if-you
State pensions

How much extra state pension you will get if you delay claiming it

If you delay claiming your state pension by a year or two you could end up much better off in retirement.
13 Feb 2020
Visit/personal-finance/equity-release/600780/equity-release-how-to-tap-your-house-for-cash
Equity release

Equity release: how to tap your house for cash

The pros and cons of releasing equity from your home compared with moving to a smaller one
10 Feb 2020

Most Popular

Visit/investments/stocks-and-shares/600863/sirius-minerals-anglo-american-takeover
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Visit/investments/commodities/gold/600874/gold-is-at-its-highest-level-in-years-heres-how-to-invest
Gold

Gold is at its highest level in years – here’s how to invest

Gold's rise at a time when the dollar is unnervingly strong isn't unheard of – but it is curious. John Stepek explains what's going on, and what it me…
21 Feb 2020
Visit/investments/stocks-and-shares/share-tips/600843/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
21 Feb 2020
Visit/517625/tr-european-growth-trust-why-investors-shouldnt-overlook-europe
Sponsored

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019