PFA Pension Contributions - Potential Tax Implications

Footballers earning over £312,000 per annum are to be hit with £900 tax bill for the 2020/2021 PFA pension contribution.

From April 2020 the UK Government has introduced new limits on the amount of pension contributions that can be paid each tax year, and receive full tax relief.

For most people the allowance is usually £40,000, although for some higher earners the maximum amount that can be paid in could be “tapered”. Everyone will retain an allowance of at least £4,000.

Those whose Adjusted Earnings* are £240,000 or less, are not affected.

For players whose Adjusted Earnings* are over £308,000 - their allowance will be lower than the increased contribution of £6,000 (currently £5,820) due to be paid on behalf of Players into the Professional Footballers’ Pension Scheme from 1 August 2020.

If your Adjusted Earnings from all sources are more than £312,000 and you do not have any unused pension tax relief from previous years, then you may be liable for a tax charge on the pension contribution above £4,000.

This could result in an additional maximum tax liability of up to £900, although it is possible this could be mitigated by the use of carrying forward unused pension tax relief from previous years.

If you have any clients in this particular situation and you would like to speak with us, please don’t hesitate to get in touch.

*Adjusted Earnings = a combination of threshold income and adjusted income. Both are defined
and explained in detail on the HMRC website https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance