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Document What is Tapered Annual Allowance?

From 6 April 2016 onwards, if you have a Threshold Income of over £110,000 your Annual Allowance may be tapered to a lower amount. There will be a tapered reduction to the Annual Allowance of £1 for every £2 of Adjusted Income over £150,000.
 
Your Annual Allowance cannot taper below £10,000.
 
The main component of both the threshold and adjusted income is your taxable income. The main types of taxable income are:
  • Employment income
  • Trading income (income from trades and professions)
  • Property income
  • Pension income
  • Social security income (where it is taxable)
  • Savings income
  • Dividend income
  • Miscellaneous income
When calculating the threshold income, the gross amount of any pension contributions paid directly out of your pensionable pay is deducted from any chargeable income to work out if this is over £110,000.
 
If you have a threshold income of £110,000 or lower you will not be subject to the Tapered Annual Allowance, regardless of the level of your adjusted income for that tax year.
 
More information about how you can calculate your adjusted and threshold income can be found on HMRC’s website.
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tapered aa, annual tapered, reduced aa, annual allowance reduced, 2016
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