Changes to income tax and tax reliefs - 2008-03-01



From 6 April 2008, basic rate income tax will decrease from 22% to 20%. Whilst this means for most people that their net pay will change slightly, it also means that the tax relief on any personal pension payments will also decrease by the same amount. This applies to personal contributions to individual arrangements, or contributions to group personal pension or group stakeholder plans (company contributions are unaffected as these are paid gross.

What this means is that in order to maintain the same gross contribution into pension after 6 April, net personal contributions must increase slightly to compensate for this 2% loss in tax relief. As a consequence, most employers and insurance companies will be adjusting salary deductions and direct debit instructions accordingly.

In reality, you may not even notice the effect of this minor change, as your net pay may also be different, due to the effect the tax changes will have on your income. We are simply making you aware of this change, and you do not need to take any action at this stage.

Employers need to be aware that all March pension contributions need to be paid and received by their pension scheme provider before Friday 4th April (and therefore any BACS / direct debit instructions must be made really before 1st April. If the receiving provider receives a March employee pension contribution after 4th April, then they will only be able to apply 20% tax relief to the contribution.

Should you require further information or assistance, please call Stan Gaskin Limited on 01473 255948.

1st March 2008.