Tapered Annual Allowance

Nathan

I am working on a case where the client only has dividend income of £42k a year (I know, I has asked why he is not using his personal allowance)

Anyway, the adviser is suggesting that his company should use carry forward to maximise his contributions over the last 3 years. The client in question has only put in £100 a month since forever, giving him carry forward and this years of £155,600.

@benjaminfabi and I are in disagreement whether this would trigger the tapered annual allowance, I am not sure it does becuase the clients threshold income is less than £110k.

Can you settle this debate for us?

arongunningham

No, you have to satisfy both tests (the £110k and the £150k ones) to trigger a taper.

EDIT: and only one of them includes employer conts.

DanAtkinsonUK

If he hasn't broken the threshold income test then you can ignore the other one so no tapering.

PS. Client will be using personal allowance up against divis. £11,850 plus the £2k will get him £13,850 tax free. Not the most efficient, but ok. I'd be picking up the NI side though, Nathan. Should show some to build up State Pension and other benefits. Aim between the LEL and the PT so the EE doesn't pay it...

parawhat

Agree with above - won't be tapered because taxable income < £110k

benjaminfabi

I thought we were in agreement? Also agree with everything in Dan's PS - I'd be making a comment in the report asking how he is building up state pension.