As a new tax year approaches, it is important to ensure you are in the best financial position to help protect and grow your future wealth.
Our Bitesize Tax Planning provides you with details of the key allowances and reliefs available to you. The tax planning tips are available in easy to consider sections.
This article looks at Pension Annual Allowance.
Pension contributions can reduce your tax liability by increasing the tax thresholds or reducing your taxable income. The annual allowance for 2021/22 is £40,000. To avoid an annual allowance tax charge, the pension contributions made by yourself, and by your employer on your behalf, must be covered by your available annual allowance.
If you haven’t used all your allowance in the last three tax years, it might be possible to pay more into your pension plan. This can be done by ‘carrying forward’ whatever allowance is left to make the most of the tax relief on offer. But bear in mind that your own tax-relievable contributions are still capped at 100% of your earnings (this doesn’t apply to your employer contributions).
However, different rules apply if you’ve already started to take money out of your pension plan and you’re affected by the Money Purchase Annual Allowance. Or if your income, when added to your employer’s payments, is more than £240,000 and without pension contributions is more than £200,000.
For more information or to discuss any of the issues raised in this article, please contact your adviser, or call us directly on 0161 819 1131.
Further information can also be found at gov.uk.
See the other topics in our Bitesize Tax Planning series:
Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.
The financial conduct authority does not regulate tax advice, estate planning or will writing.
The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.
Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
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