It is important to start pension planning now. For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.
Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2016/17 will lapse on 5 April 2020. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000.
Will pension tax relief change in the budget?
There are frequent rumours that pension tax relief will change in the Budget. This is even more likely this year as the new Government looks for additional tax revenue to fund its ambitious spending pledges such as the HS2 rail link.
There is speculation that the restriction for those with income over £150,000 may be removed but at the same time higher rate tax relief may be removed. One suggestion is that tax relief may be “simplified” by limiting relief to say 25% or 30% so that the government would increase a £750 pension saving to £1,000 but with no further tax relief.
If you have surplus cash you might wish to consider maximising your pension relief before Budget Day.
Need more information?
If you need any guidance on pension planning, please do not hesitate to contact our expert tax team. We offer a wide range of services which are unique to you. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.
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