Changes to the tapered annual allowance
For those affected by the tapered annual allowance, the annual allowance gradually reduces from the standard £40,000 figure down to a minimum of £4,000. The tapered annual allowance applies to individuals whose threshold income is now above £200,000 and whose adjusted income is above £240,000.
Before 6 April 2020, the tapered annual allowance applied to individuals whose threshold income was above £110,000 and whose adjusted income was above £150,000. The minimum allowance was £10,000.
How does the taper work?
If your client is affected by the tapered annual allowance, they will lose £1 of annual allowance for every £2 of adjusted income above £240,000. Your client’s annual allowance will not drop below £4,000 though, so if their adjusted income is more than £312,000 there is no further reduction.
Finally, the lifetime allowance has increased to £1,073,100.