Autumn Budget 2024: Read our update
The end of the tax year is approaching, that means it’s an ideal time to review your retirement savings and potentially reduce your tax bill by paying into a pension.
It won’t take long to read this, but it could help you keep significantly more of what you earn. The government is concerned that people aren’t saving enough for their future, so they offer tax relief for those who plan ahead.
The government is keen on encouraging saving for retirement and offers attractive tax incentives for early planners. Here’s how it works:
Tax relief on pension contributions is one of the main advantages of pensions when it comes to saving for the future. Discover more about these perks and how they can work in your favor in our Pension tax relief explained guide.
For the self-employed, pension contributions offer a tax-efficient saving route. Annually, you can contribute up to £60,000, or 100% of your total annual income, whichever is lower, to enjoy a 25% tax bonus on these contributions. This applies across all of your pensions, not each pot separately.
However, exceeding your annual pension allowance could trigger an ‘annual allowance charge.’ This is essentially a tax charge owed on any amount over the contribution limit.
Learn more about these contribution limits in our How much can self employed pay into a pension? guide.
Limited company directors have a unique advantage. By making pension contributions, you can significantly lower your corporation tax bill. Here’s why:
Discover more in our How much can a company contribute to a director’s pension? guide.
The approach of the tax year end is an excellent time to make strategic decisions impacting both your current financial health and your future financial well-being.
Contributing to your pension isn’t just a wise move for your future self; it’s a savvy strategy for your present financial health. By understanding and utilising the benefits of pension tax relief, you’re taking an important step towards a more secure retirement.
Review your pension contributions today for a chance at significant savings and the peace of mind that comes with knowing you’re proactively preparing for life after work. Your future self will thank you!
Murray Humphrey
Penfold