From 6th April 2016 individuals with ‘adjusted income’ of more that £150,000 will have their annual allowance restricted. ‘Adjusted income’ means the total amount of income for the tax year on which an individual is subject to income tax. This includes salary, bonus, profits from self-employment, benefits in kind, pension income, income from property, savings, dividends etc.
There will also be an income floor of £110,000 which is called the ‘threshold income’. Where an individual has ‘threshold income’ of £110,000 or less they will not be subject to the tapered annual allowance even if their ‘adjusted income’ is greater than £150,000.
The taper will mean that for every £2 of income that exceeds £150,000, £1 of annual allowance will be lost. There is a cap on the taper of £30,000 which means that minimum tapered annual allowance is £10,000.
If you think you may be affected or want to know more then get in touch.