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All About Tax

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  • The main tax limits are on the amount you can pay in and benefit from tax relief, the Annual Allowance, and the amount of benefits you can receive, the Lifetime Allowance, without incurring extra tax.
  • It is your responsibility to monitor your own position in relation to both the Annual Allowance and the Lifetime Allowance.
  • Your Benefit Statement shows your fund value as a proportion of the Lifetime Allowance
  • The Government limits the amount of tax relief you get through the Annual Allowance.
  • The Annual Allowance for tax relief on contributions into all pension arrangements (not just Cheviot), including your employer contributions, is currently £40,000 per tax year. If you are also earning benefits in a defined benefit or final salary scheme, the value of those benefits count too.
  • If you have taken out cash or income from any pension arrangement, the Annual Allowance drops to £4,000 per tax year, known as Money Purchase Annual Allowance.
  • If you exceed the Annual Allowance, you will need to pay more tax, usually through your tax return. You may be able to use unused tax relief from the previous three years – click here for more information.
  • The Annual Allowance is calculated for each Pension Input Period. Pension Input Periods are aligned with tax years. Click here for more information.
  • The Lifetime Allowance is the maximum amount you can receive from all your pension arrangements (excluding any State Pension benefits) without paying extra tax.
  • The current limit is £1 million (from April 2016).
  • If you exceed the Lifetime Allowance, you will currently pay tax at a rate of 55% if the amount over the limit is taken as a lump sum or 25% if the amount of the limit is taken as income. Income tax at your marginal rate will also be payable on any income.
  • When you take benefits, your pension provider will tell you how much of your Lifetime Allowance you have used.
  • For information about the Lifetime Allowance and whether you can get protection, please click here.
  • The Lifetime Allowance in previous years has gone down.
  • You may have applied for protection against changes in the Lifetime Allowance.
  • You need to inform us if you have any form of protection.
  • Click here for more details about how to claim protection from changes in the Lifetime Allowance.

The information on this page is provided in good faith but is not legal or financial advice or binding on the Trustee. The trust deed and rules will override in the event of any inconsistency.


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