In his 2007 Budget statement, the Chancellor of the Exchequer announced the reduction of basic rate income tax from 22% to 20% and the removal of the 10% starting rate tax band.
Will this affect me?
The change will affect all customers who are contributing to a personal pension, FSAVC or Stakeholder policy. In addition, some annuitants will see the tax deductions from their annuities change (either increasing or decreasing depending upon the level of payments and the individual’s tax code).
This change will not affect you if you make payments to a Retirement Annuity Contract.
What does this mean for you? – if you are receiving income from us
Any income which is currently taxed at the 10% starting rate will, from 6 April 2008, be taxed at the new 20% basic rate of tax. As a result, from 6 April 2008, anyone whose income falls, either partly or wholly, within the current 10% band will possibly pay more tax.
What does this mean for you? – if you are making pension contributions
The reduction in the basic rate of tax, from 22% to 20%, affects the amount of tax relief which we can claim on your behalf, in respect of pension contributions made after 5 April 2008.
You will find that, in order to keep your pension contributions at the same gross level, your payments will need to increase. Your new contribution levels are shown on the letter we have sent to you.
If you pay by Direct Debit – From 6 April 2008 all payments made from your bank account will be automatically adjusted to the new amount. Therefore, no further action is required of you.
If you pay by standing order - You need to contact your bank and inform them to increase the standing order to the new amount before 5 April 2008.
If you pay by any other method - Please refer to the letter we have sent to you.
Below is an illustration of how the tax rate change may affect your pension contributions
Before 6 April 2008
Your contribution
Tax relief
Total contribution
£3900
£1100
£5000
£7800
£2200
£10000
£15600
£4400
£20000
On or after 6 April 2008
Your contribution
Tax relief
Total contribution
£4000
£1000
£5000
£8000
£2000
£10000
£16000
£4000
£20000
Further Information
For further information, please contact your local tax office. You can find their details on the HM Revenue & Customs website www.hmrc.gov.uk
Pearl Assurance Limited No. 1419, London Life Limited No. 1179800, NPI Limited No. 3725037 and National Provident Life Limited No. 3641947 are authorised and regulated by the Financial Services Authority. All companies are registered in England and have their registered office at: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG, Tel: 01564 204321. We may record or monitor telephone calls. Important Company Registration and Legal Information.
