PER­SONAL AC­COUNT

The Daily Telegraph - Your Money - - YOUR MONEY - Richard Evans

Of all Ge­orge Os­borne’s idi­otic taxes, this one is surely the worst

My col­league Richard Dyson, whose col­umn nor­mally ap­pears here, has of­ten used this space to high­light the id­io­cies of Bri­tain’s labyrinthine tax sys­tem, in par­tic­u­lar the new taxes in­tro­duced by Ge­orge Os­borne.

We have seen the ab­sur­di­ties of the tax that you pay on losses rather than gains, cour­tesy of the inane and in­co­her­ent in­come tax regime for buy-to-let land­lords. The de­lights of the stamp duty sur­charge, which pe­nalises some cou­ples for be­ing mar­ried and oth­ers for be­ing di­vorced, have also been ex­posed.

Both of these mon­strosi­ties re­quire im­me­di­ate re­moval from the statute book and Theresa May, de­spite her many press­ing du­ties, should en­sure that it hap­pens.

But now it ap­pears that an even more lu­di­crous piece of tax leg­is­la­tion ex­ists among Mr Os­borne’s un­ap­peal­ing legacy.

This week ex­posed the al­most unimag­in­ably com­plex task that awaits pen­sion savers who fear they may be caught by the new “ta­per” that ap­plies to the an­nual al­lowance for pen­sion con­tri­bu­tions (you can find the story at tele­graph. co.uk/pen­sions-re­tire­ment).

The mea­sure re­duces the nor­mal limit of £40,000 a year grad­u­ally when your in­come reaches £150,000. But de­cid­ing whether you will be caught by the re­stric­tion, which you will need to do if you plan to make sig­nif­i­cant pen­sion con­tri­bu­tions, or if your em­ployer does so on your be­half, is all but im­pos­si­ble. Even tax ex­perts have told us that they strug­gle to cope with the in­tri­ca­cies.

For one thing, the law re­quires you to look at two sep­a­rate mea­sures of in­come, “thresh­old” and “ad­justed”.

Thresh­old in­come in­cludes in­come from all sources, not just your salary. Then, in a fur­ther twist, pen­sion con­tri­bu­tions them­selves need to be taken into ac­count, in what one ac­coun­tant called a “chicken and egg” sit­u­a­tion.

High earn­ers who are also mem­bers of fi­nal salary schemes, such as doc­tors, face an es­pe­cially ar­du­ous task as de­ter­min­ing what counts as a “con­tri­bu­tion” to such schemes is far from straight­for­ward.

That’s not all of the ins and outs but I’ll spare you the rest. The up­shot of it all is that many peo­ple who earn £100,000 could be caught by a tax that is sup­posed to ap­ply only to those who earn half as much again. These peo­ple have a num­ber of op­tions, none at­trac­tive.

They can at­tempt to work through the cal­cu­la­tions them­selves, al­though the fear will be that they miss some­thing and end up pay­ing tax on their con­tri­bu­tions or pay­ing in less than they could have done.

They could hand this task over to a pro­fes­sional, al­though this would of course cost money. Or they could take the path of least re­sis­tance and sim­ply re­strict their con­tri­bu­tions to £10,000. This guar­an­tees that they won’t face an un­ex­pected tax bill later on, but could mean miss­ing out on tax re­lief on £30,000 of con­tri­bu­tions – a size­able sum.

Highly paid pub­lic sec­tor work­ers such as doc­tors could fall foul of the new ‘ tax ta­per’ on pen­sion con­tri­bu­tions

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