Spring Budget 2020: Govt increases taper earnings threshold to £200k

The government has announced that it is increasing the earnings threshold for the tapered annual allowance from £110,000 to £200,000.

Chancellor Rishi Sunak confirmed the change in the Budget today (11 March), and the government hopes it will help ease the problem of high earning NHS staff cutting their overtime hours by providing them with a tax boost.

The move affects all high earners in the private and public sector, not just NHS staff.

In his Budget speech, Sunak said that this would result in “98 per cent of consultants and GPs” being outside the scope of the taper altogether.

He also announced that the minimum annual allowance would be reduced to £4,000, with this reduction only affecting those earning more than £300,000 a year.

Despite the changes, industry figures have warned that increasing the threshold may not go far enough to solve the issues surrounding the taper.

Commenting, Smart Pension director of policy, Darren Philp, said: “While the government is clearly right to act, it’s just shifted the issue further up the income scale and it is ridiculous that our pensions tax relief system has to include such fudges to make it workable and sustainable.

“Piecemeal policymaking doesn’t work when it comes to designing and implementing a system that is meant to incentivise and reward people saving for the longer term, and rather than continually tinker we’d like to see the government develop a system that is fair, workable and sustainable over the longer term.”

LCP partner, Steve Webb, added: “The system of pension tax relief is far too complicated and this is a missed opportunity to make the system simpler and clearer.

"Although raising the thresholds will substantially reduce the number of people affected by the tapered annual allowance, some higher earners are still at risk of being caught, especially if they get a promotion or take on additional responsibilities.

"What was needed was sweeping simplification but what we got was more Treasury tweaking."

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