Tax Changes for Retirement Funds in 2016

Tax Changes What You Need to Know

Whilst this year’s Autumn Statement seems to have been delivered such a long time ago in the world of finance, the latest changes and their effects are only just being realised and felt by businesses and individuals alike. As an accounting firm that always has its finger on the pulse regarding tax amendments and other Treasury changes, we thought we’d utilise this blog entry to offer a valuable insight into how tax for retirement funds will alter into the New Year.

When will the tax harmonisation reforms come into effect?

Any tax reforms can provide an uncomfortable shift for those affected, after all with the abundance of jargon present today it can be difficult to ‘get your head around’ many aspects of personal and corporate finance management. The latest set of reforms are due to come into effect from 1st March 2016, and will change how those at or approaching retirement age manage their funds.

What will the changes mean for taxpayers?

Known formally as the ‘2015 Taxation Laws Amendment Bill’ and successfully passed later last month by the National Council of Provinces (NCOP), the reforms will affect all individual taxpayers who are contributing to a pension, provident fund or annuity in preparation for their retirement. The changes will mean that all contributors will qualify for a deduction of up to 27.5% on all taxable income remuneration up to £350,000. In addition to unlocking major savings for those speeding towards retirement age, the amendments will alter how individuals can access their pension pots.

Under the new laws, up to 33% of the retirement fund can be paid out as a cash lump sum with the remainder distributed as an annual payment allowance or income. As with any amendment there is criteria for qualification, and whilst the changes will unlock benefits for all taxpayers, new contributions to provident funds made after the March implementation date by those aged 55 years or younger will be subject to annuitisation whereby the two-thirds are paid out annually.

Want to know more about the tax changes?

As a leading accountant serving the North East of England, we have built a reputation for delivering a range of timely, professional and cost effective accounting services. In addition to being experts in the industry since our foundation in 1998, we pride ourselves on delivering the advice that individual taxpayers, sole traders, start-ups and multi-million pound corporations need to manage their finances correctly, even in light of tax reforms.

For further information on any of the points raised in this article, please call our team direct on 0191 251 7599.