What if your client has bust the MPAA since April?
14 July 2017
When elements of the Finance Bill were left out in order to get it through Parliament post the snap General election, one of the proposed changes left without a firm resolution was the reduction in the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000.
This was intended to be effective from 6 April 2017 but there had been speculation that the drop to £4,000 would be delayed to next tax year as it is unlikely to be in legislation until late this year. So, in effect, it was left in limbo, with adviser firms not knowing whether to continue under the £10,000 limit for this year or advise clients to reduce their contributions to the intended £4,000.
Earlier this week, Treasury and HMRC confirmed that the £4,000 limit will be applied retroactively from April 2017.
Suffolk Life, which has produced a useful fact sheet on this that you can access here, advises that if you have clients who have triggered the MPAA and have already contributed over £4,000, there’s very little to be done until the end of the tax year.
Clients who have exceeded the MPAA have the same options as those who exceed the annual allowance:
• they can pay the tax charge through their self-assessment tax return for 2017/18
• they can ask their pension provider to pay the charge through their pension using Scheme Pays.
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