Important Update - Changes to the Money Purchase Annual Allowance
We recently communicated changes to the Money Purchase Annual Allowance (MPAA), reducing the maximum limit from £10,000 to £4,000. These changes came into effect on the 6th April 2017 as part of the government’s spring budget and were part of the initial Finance (No.2) Bill 2017.
As a result of the announcement of a general election, the government did not get the reduction in the MPAA into the Finance (No.2) Bill 2017 owing to the need to get the Bill through Parliament before the general election. This leaves the maximum at £10,000.
The view is that depending on the outcome of the general election, the proposal to reduce the MPAA will be reintroduced to Parliament in future at the earliest possible opportunity. This has resulted in caution over the level for the 2016/17 tax year as if the change is reintroduced, it could result in a retrospective tax charge.
If you are subject to the MPAA and thinking of paying over £4,000 in to any defined contribution (also called money purchase) scheme, we strongly recommend you that you talk to a regulated financial adviser.
Whilst we are making every effort to make the appropriate amendments to our recently updated documentation so that it shows the MPAA as £10,000, you may continue to see references to the MPAA limit at £4,000. Please note that if you see this remember it is £10,000.
What does this mean for me if I am impacted by the MPAA?
For the time being, there will be no change to the current maximum limit which is £10,000 per year. If you exceed the money purchase annual allowance in a tax year, then you may be subject to an annual allowance tax charge.
If you have any queries or concerns about your maximum contribution allowance, we recommend that you speak to a regulated financial adviser. If you do not have a financial adviser but would like to speak to one, please visit www.unbiased.co.uk or call 0800 023 6868 to obtain a list of financial advisers in your local area.