Tax Relief On Pensions Reduced

Contractors are set to see a sharp reduction in the amount they can put into their

pension schemes without paying tax after the government announced that it would be reducing the annual tax-free pension limit.

The annual limit will be cut from 255,000 to 50,000 from next April, while the lifetime limit will fall from 1.8million to 1.5million in April 2012.

The move, which it is estimated will save the government 4billion per year, replaces the previous governments plans to gradually withdraw tax relief on contributions by higher earners on a sliding scale.

Up to 500,000 people may face higher tax bills as a result of these changes, with many of these expected to be limited company or Umbrella Company contractors who channel their earnings into pension schemes to provide an income for retirement.

Among ordinary taxpayers, only the highest earners are likely be affected but many contractors with comparatively modest incomes make larger-than-average pension contributions, to make use of one of the few tax reliefs available to them.

Gerry Gregoire from Danbro; the UKs leading Contractor Accountants said: These changes are set to hit contractors particularly hard and appear to fly in the face of this governments stated aim to encourage more people to take responsibility for their own retirement.

While the limits are not as low as they might have been, we are disappointed that contractors, who enjoy few tax breaks as it is, are likely to have this option taken away from them.

For further details, please contact Danbro on: 01253 600141,

General Enquiries: 01253 600140,

London Office: 020 7836 8400 or

E-Mail: enquiries@danbro.co.uk

by: Alex Askew

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