This year marks the commencement of compulsory pension's provision for employers, clearly in these challenging economic times the additional administrative and financial burdens are a headache for many firms. It is, therefore, pleasing that in the 2012 budget George Osborne has decided to leave the current pension tax regime intact.
The upper rate of Income Tax will be reduced to 45% from 6 April 2013, this creates an opportunity for high earners who have earnings in excess of £150,000 in the current tax year to benefit from 50% tax relief. For those who have not made any pension provision it is possible through careful planning to fund £200,000 into a pension plan before April 2013 by means of “carry forward”.
Also by juggling the pension input periods, it is possible to accelerate funding for 2013/14 to obtain 50% tax relief. On a separate note, some firms have been promoting a tax loophole which allows an employer to gain tax advantages for paying pension contributions into a registered pension scheme for an employee’s spouse or family member. The government have indicated they will move to close this loophole. The reduction in the corporation tax rate to 24% not only provides welcome relief for business in the current economic climate, but also makes the UK an attractive place to do business.
The Chancellor indicated that by 2014, the UK will have a corporation tax rate of 22%, the lowest in the G7 and 4th in the G20. Further confirming his commitment to a “one tier” UK state pension system, details of the steps that will lead to a flat rate state pension of approximately £140, are to be announced in the spring. In the summer there will also be a proposal, whereby State Pension Age reviews are undertaken to reflect increased longevity. This could mean younger people waiting until age 75 before they can draw on their state entitlement.
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