How to calculate new tax charges for your DB clients

Jonathan Stapleton
clock

Our step-by-step guide to calculating the potential tax charges for defined benefit schemes following Treasury changes to the annual allowance.

The government today confirmed it will cut the annual allowance from £255,000 to £50,000 and the lifetime limit from £1.8m to £1.5m. Additionally, it has increased the factor for valuing final salary benefits from 10 to 16. But how do you calculate the tax charge? We use the example of a member who has been a member of a 1/60th final salary scheme for 34 years and gets a 20% pay increase from £60,000 to £72,000. Such a member would see her tax liability calculated as follows. First the opening pension entitlement is calculated as £34,000 (34/60 of £60,000). Next the openin...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Advisers turn to smoothed funds to help manage volatility threat

Advisers turn to smoothed funds to help manage volatility threat

Decreasing exposure to equities also a popular strategy

Isabel Baxter
clock 26 March 2024 • 1 min read
Examining the 60/40: Building diversified portfolios in 2023

Examining the 60/40: Building diversified portfolios in 2023

Advisers have a lot to consider when it comes to portfolio diversification

Charlotte Moore
clock 14 April 2023 • 6 min read
Schroder Investment Solutions expands distribution of MPS

Schroder Investment Solutions expands distribution of MPS

Expanding the range of DFM choice on the Parmenion platform

Ayesha Venkataraman
clock 06 December 2022 • 2 min read