Maximise your pension contributions whilst you can

Maximise your pension contributions

Following the recent consultation on the future of pension tax relief, there is much discussion in the financial press as to whether pension tax relief for those paying higher rates of income tax will be targeted in the next Budget on 16 March. 

If you are subject to the higher tax rates of income tax this year, if funds allow, we suggest you consider maximising your pension contributions while you can, as it could be your last chance to do so with the current levels of relief.

Make the most of carry forward

If you haven’t fully utilised your annual pension allowance during the last three tax years, you may use carry forward to make a large pension contribution in the current tax year, providing your overall pension contributions do not exceed 100% of your earned income.  Your pension contribution will be paid net of 20% tax relief, which will be reclaimed by your pension provider to boost your pension fund.  A further 20% (for higher rate 40% taxpayers) or 25% (for additional higher rate 45% taxpayers) may be reclaimed via your self assessment tax return.

An added benefit of making a pension contribution is that you are removing the funds from your estate, with a potential saving of 40% inheritance tax.

Please contact us as soon as possible if you would like to discuss making a pension contribution before this year’s Budget.

 

Posted on February 27th 2016

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