In a recent survey, over 25% of people in the United Kingdom said they'd never heard of Pensions' Tax Relief and a lot less understood what it meant for them ...
If you pay a higher or additional rate of income tax you could benefit from additional tax relief which you can claim via a self-assessment tax return. The Government don’t contribute further into the pension plan, but they do give further tax relief by lowering your tax bill.
There is a generous limit on how much you can save into pension plans (annual allowance) and how much you can build up in all of your pensions (lifetime allowance) though it is restricted. It’s worth checking if you are caught.
The annual allowance is a limit on the amount of pension contributions you can make each year before you're taxed. The annual allowance for the 2021/22 tax year is £40,000.
You can pay in up to 100% of your earnings or £40,000, whichever is lower, and receive tax relief on these contributions. You can also ‘carry forward’ unused annual allowance from the last three tax years.
The lifetime allowance is a limit to the amount you can build up in all of your pension plans when you start taking your pension savings. The lifetime allowance for 2021/22 is £1,073,100. If you take any of your savings and go over this limit, you may be subject to a lifetime allowance charge.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.