Contractors are no doubt aware that the government recently changed the rules on the amount of money people can put aside in a pension scheme and still benefit from tax relief. It used to be £225,000, but earlier this year chancellor Osborne reduced that to a mere £50,000 per year.
However, there are some complex transitional rules that allow contractors to carry forward unused allowances to the following year. HMRC recently relaxed these transitional rules for the years 2008-09, 2009-10 and 2010-11.
Take for example a self-employed web designer who has contributed £20,000, £40,000 and £30,000 to his pension over the past three financial years. This year, the web designer had a really good year and wants to increase the amount he pays into his pension pot. He has not used his entire annual allowance over the last three years and therefore he has £60,000 to carry forward, giving him a tax-free allowance of £110,000 this year.
Meanwhile, a lot of companies are still unprepared for the new pension regime that comes into force next year.
Research from the CIPD shows that 75% of companies know that changes are imminent, but only 32% actually know when they need to start applying them.
Pensions auto-enrolment will affect large organisations first and yet nearly a third of those companies do not know if their implementation date has been identified. A major problem seems to be that some HR departments have assumed that another department is dealing with the 2012 pension changes, while other departments think HR is taking the required action. A definite case of lack of communication!
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Image: ON THE REBOUND by Neal.
