HMRC McCloud calculator – Annual and Lifetime Allowance

Hot off the press is the much anticipated HMRC calculator that enables taxpayers to work out the tax differences arising from the rollback of benefits to their old scheme (annual allowance) or from making a different choice for benefits to 2022 if pension benefits have been taken (lifetime allowance), or possibly both, but they can’t be done simultaneously.

This article concerns annual allowance only.  The obligations for calculating the difference in lifetime allowance in the calculator are less onerous.  For annual allowance, many people will not be able to use this yet as they will need certain paperwork that may not be issued, for active members of the scheme, until October 2024.  To enable the calculator to be used, here is what will be needed:

  1. Copies of original pension savings statements based upon the legacy scheme and 2015 scheme membership in the remedy years 2015/16 to 2021/22, as well as for 2022/23 as there is a slight overlap of days at the beginning of 2022/23.  For 2015/16 the entries need to be split between the pre and post-alignment periods.
  2. Copies of pension savings statements for the same years as above but based upon legacy scheme membership only in the relevant remedy years.
  3. Details of total gross income in each relevant year.  The full tax calculation is therefore required.
  4. Details of adjusted income in each relevant year ( taxable income plus the total pension input amount from both schemes) on the basis of dual membership as in number 1 above.  The  tax calculation and the original pension savings statements will be required for this.
  5. The amount of tax paid  in each year.
  6. The amount of tax paid by the scheme in each year.
  7. Pension scheme tax references.

A trial run has been completed based upon a client for whom we have prepared all the relevant calculations already and so know the figures.  Even with all the information reasonably at hand, there are over 40 separate figures to enter taken from diverse places.  The trial took over two hours to complete.  Whilst the output did correctly work out the correct tax difference, that is not the end of the story. 

YOU WILL NEED TO TAKE ACTION, AND THE SOONER THE BETTER.

The above is merely a calculator.  It does not do anything to actually change the tax position.  For that, a taxpayer  will need to access their Personal Tax Account.  This is the account  set up personally with HMRC through the Government Gateway. 

It does not appear at this stage that your accountants , as agents, are able to do this on behalf of  clients.  There are therefore references to two websites below.  The first is the site to set up a Personal Tax Account.  The second is to the calculator referred to above.

www.gov.uk/personal-tax-account

www.gov.uk/guidance/calculate-your-public-service-pension-adjustment

The above, of course, will only be possible if all the relevant statements, both before and after rollback, have been issued.  Particularly for GPs, that is unlikely to have been the case.  More work will therefore be required to request before and after statements from NHS Pensions so that the calculator can be used and then the tax amendments made through the Personal Tax Account.

So, the message here is this:  Please create a Personal Tax Account now so that your accountant is in a position to assist in having the tax corrected as soon as possible once statements are available.