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16 March 2020

Budget update

Following on from the general election, the new government’s first Budget took place on 11 March 2020.

The Chancellor of the Exchequer, Rishi Sunak, delivered his first Budget in the House of Commons, announcing the government's tax and spending plans for the year ahead.

Although there had been rumours of potentially significant changes in pension tax relief in the run up to the Budget, the pension-related announcements were not as major as expected.

Changes were announced in the following areas:

Tapered Annual Allowance

The Budget saw an increase in the Tapered Annual Allowance (which reflected the Conservative manifesto pledge to review this area). From Monday 6 April the income threshold will be increased to £200,000, an increase of £90,000 from its current amount.

The new rule will affect those who have an ‘adjusted income’ above £240,000 - the £200,000 allowance plus the £40,000 Annual Allowance you can save into a pension.

However, the minimum level of Annual Allowance applying under the taper system reduces from £10,000 to £4,000, so some high earners will lose tax relief. 

You can learn more on the Annual Allowance (including the tapered Annual Allowance) at Gov.uk/tax-on-your-private-pension/annual-allowance

Lifetime Allowance

The maximum amount you can save in a pension over a lifetime (Lifetime Allowance) will increase from £1,055,000 to £1,073,100 for the 2020/21 tax year.

Seeking feedback on the tax relief system

​The Budget announced that there is to be a call for evidence about how tax relief applies under net pay arrangements. The alternative tax relief system, referred to as ‘relief at source’, takes contributions from income after tax, with the pension scheme reclaiming basic rate tax relief from HMRC.