Lee Mannion | Thursday 23rd February, 2023
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 literally gives you free money if you save into a pension. How does this work?
Tax relief on pension contributions is one of the main advantages of pensions when it comes to saving for the future. Learn more about pension tax relief.
Each tax year, self-employed savers can contribute up to £40,000, or 100% of their total annual income, into your pension to claim the 25% tax bonus. This applies across all of your pensions, not each pot separately.
If you exceed your annual pension allowance, you’ll be liable for an ‘annual allowance charge’. This is essentially a tax charge owed on any amount over the contribution limit.
Find our more about how much can self employed savers pay into a pension.
Limited company owners can benefit by cutting the amount of profit that is taxed at the 19% corporation rate.
Contributions must be paid before the end of the company’s financial year in order to count. Find out how much can a company can contribute to a director's pension.
Finally it's worth bearing in mind that the governments next budget will be announced on 15th March 2023, and who knows what changes that will bring for everyone.