2024/25 Tax Year End Guide: Maximise Your Pension Savings

The 2024 to 2025 tax year comes to an end on April 5th - your last opportunity to take advantage of key tax breaks and savings allowances

Now is the perfect time to ensure you're making the most of your pension and maximising your tax relief. Need a hand? Use our handy tax year-end checklist below to stay on track!

Tax Year-End Pension Checklist

1. Maximise your pension allowance
2. Carry forward previous years’ allowances
3. Claim higher rate pension tax relief
4. Reclaim your Personal Allowance
5. Reclaim your Child Benefit
6. Add your bonus to your pension
7. Pay into a spouse’s pension
8. Pay into a Junior SIPP for your children
9. Boost your State pension
10. Review your nominated beneficiary

Let's break down how these strategies work.

Maximise Your Pension Allowance

For the 2024/25 tax year, you can contribute up to £60,000 (or 100% of your annual earnings, whichever is lower) into your pension and benefit from tax relief. Basic rate taxpayers receive a 25% tax relief bonus on their contributions up to this limit. That means the maximum you can pay in is £45,000 this year - the rest will come from tax relief.

Carry Forward Unused Allowances

If you haven't used up your pension allowance in the past three tax years, you can carry forward any unused allowance to make a larger contribution. After April 5th 2025, any remaining allowance from the 2021/22 tax year will be lost.

Claim Higher Rate Pension Tax Relief

If you earn above £50,270, you're entitled to additional pension tax relief beyond the basic rate. The best part is, this additional tax relief doesn't need to go into your pension.

You can pay £10,000 into your pension by April 5th, then receive £2,500 back from the government in cash from April 6th! Claim it via a self-assessment tax return or by getting in touch with HMRC. We explain how to do it, step-by-step, here: How to claim higher rate pension tax relief.

Reclaim Your Personal Allowance

Earning over £100,000? Your tax-free personal allowance, the portion of your earnings you don’t pay tax on, starts to shrink – reducing by £1 for every £2 earned over this threshold. By contributing to your pension, you can reduce your income on paper, helping to maintain your personal allowance and letting you keep more of your money.

Reclaim Your Child Benefit

Anyone earning over £50,000 will start to see their Child Benefit reduced. From £60,000, you’ll lose your Child Benefit completely. Contributing into your pension can reduce your annual income on paper, letting you receive more Child Benefit, while also increasing your retirement savings. Find out how it all works in our guide: how to avoid the Child Benefit tax.

Add Your Bonus to Your Pension

If you're expecting a bonus before April 5th, 2025, consider asking your employer to pay it directly into your pension. Doing so can help you avoid Income Tax and National Insurance charges, maximising your take-home savings. Read our Maximise your bonus article to find out more.

Pay Into a Spouse’s Pension

If your spouse or significant other has a pension of their own, you can also pay in their pension on their behalf. Remember, they will also be subject to the £40,000 annual pension allowance. If your spouse doesn’t work, you can set up a pension in their name and contribute up to £2,880 into it. With tax relief, this becomes £3,600.

Pay Into a Junior SIPP

You can contribute up to £2,880 into a Junior SIPP for each of your children. Contributions into a Junior SIPP enjoy the same tax relief as a regular pension, meaning your £2,880 will be topped up to £3,600 by the government.

Boost Your State Pension

To qualify for the maximum State pension, you’ll need to have 35 years of National Insurance contributions on your record. If you’ve taken a career break or stopped working, you might want to consider checking your National Insurance record and potentially make a voluntary contribution to fill in any gaps.

Review Your Nominated Beneficiary

Your pension can be passed on tax-free in most cases. Ensure your nominated beneficiary is up to date to ensure your pension savings go to your chosen loved ones. Penfold savers can add or review their nominated beneficiary by heading to ‘Beneficiaries’ online or in the Penfold app.

Company Directors: Reduce Your Tax Bill

If you're a Limited Company Director, making employer contributions into your pension can be an excellent tax-saving strategy. Contributions are:

• Offset against your annual profits - reducing the amount you owe in corporation tax by 19-25% depending on the company profit amount.
• Exempt from National Insurance
• Not subject to Dividend Tax

Pension contributions are a tax-efficient way for company directors to extract profits from their business.

Take Action Before April 5th!

Navigating pensions and tax relief can be complex, but taking action before the tax year ends can make a significant difference to your savings. Make sure you're getting the most from your pension – don't leave your allowances unused!

Ready to get started? Check your pension today to make the most of the 2024/25 tax year end!