Annual allowance charge

A tax charge arising in respect of a member of a registered pension scheme (www.practicallaw.com/5-201-6474) whose pension saving exceeds the annual allowance (www.practicallaw.com/6-201-6478). Liability for the charge arises if the member's total pension input amount (www.practicallaw.com/4-504-0739) in a tax year exceeds the annual allowance. The charge is designed to recoup excess tax relief and so applies at 20%, 40% or 45% according to the rate at which tax relief is available on the member's contributions or accrual. The member is primarily liable to pay the charge, but if it exceeds £2,000 and certain conditions are the met, the scheme administrator and member are jointly liable for payment.

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