Pensions: Tax Allowances

(asked on 23rd October 2014) - View Source

Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, with reference to the Answer of 20 February 2012, Official Report, column 643W, on tax allowance pensions, what proportion of income tax relief on contributions accrued to, or is expected to accrue to, individuals with an annual income of (a) up to £19,999, (b) between £20,000 and £44,999, (c) between £45,000 and £74,999, (d) between £75,000 and £99,999, (e) between £100,000 and £149,999 and (f) over £150,000 in (i) 2010-11, (ii) 2011-12, (iii) 2012-13, (iv) 2013-14 and (v) 2014-15.


Answered by
David Gauke Portrait
David Gauke
This question was answered on 10th December 2014

The proportion of the cost of income tax relief on pension contributions for the given income ranges, and years, is provided in the table below.

% of the cost of income tax relief on contributions

Income bands

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

Up to £19,999

8%

6%

5%

6%

5%

5%

Between £20,000 and £44,999

31%

32%

35%

37%

37%

36%

Between £45,000 and £74,999

25%

26%

28%

32%

33%

34%

Between £75,000 and £99,999

7%

8%

8%

10%

10%

10%

Between £100,000 and £149,999

8%

9%

9%

7%

8%

8%

£150,000 or more

20%

18%

14%

8%

7%

7%

All

100%

100%

100%

100%

100%

100%

Estimates are based on Surveys of Personal Incomes with projections for 2012-13 onwards. Historical estimates have been updated to take into account the latest outturn data and updated projections. Projected years are subject to uncertainty.

The effect of the reductions in the Annual Allowance in 2011‑12 and Lifetime Allowance from 2012-13, as well as further reductions in both allowances in 2014-15 are reflected in the table. These restrictions mostly affect individuals with incomes over £150,000 hence the drop in share of tax relief for these individuals in latter years.

Increases in the Personal Allowance (from £6,475 in 2009-10 to £10,000 in 2014-15) cause a decline in the share of income tax relief going to those in the “Up to £19,999” income band. The higher personal allowance reduces the amount of income subject to tax for these individuals, hence also reduces their share of tax relief.

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