Tapered annual allowance - decision tree
6 April 2023
Key points
- Annual allowance tapering for high earners was introduced from tax year 2016/17.
- Where tapering applies, the annual allowance is reduced by £1 for every £2 of adjusted income between £260,000 and £360,000 for tax years for tax year 2023/24 onwards. For earlier tax years those amounts were between £240,000 and £312,000 (2020/21 to 2022/23) and between £150,000 and £210,000 (2016/17 to 2019/20).
- Contributions in excess of a tapered annual allowance may be possible if the individual has unused annual allowance to carry forward from any of the previous three tax years.
Before using this decision tree, you will need the following information to assess an individual's position in relation to the tapered annual allowance for a specific tax year:
- The indvidual's total income (before tax) from all sources - this includes earnings, P11D benefits, savings income, dividend income, pension income (including State Pension), rental income, etc
- The value of any employer pension contributions
- Any pension contributions made by the individual
- Details of any salary (or bonus) sacrifice arrangements - including when the arrangement was set up or updated
This decision tree can be used to highlight where individuals could be impacted by a reduced annual allowance.
Assumptions and limitations – The decision tree outcomes are based on a number of assumptions and are only illustrative. Abrdn does not accept any responsibility for any loss caused by reliance on this decision tree. This does not constitute financial or other professional advice from abrdn. If you require tax or other professional advice you should consult a suitability qualified professional.