2023/24 Tax Year End Guide: Maximise Your Pension Savings

The 2023 to 2024 tax year comes to an end on April 5th - and with it, your last chance to take advantage of some very generous tax breaks and savings allowances.

Now is the perfect time to make sure you’re making the most of your pension and maximising your tax relief. Need a hand? Just work your way through our handy tax year end checklist below!

1. Maximise your pension allowance
2. Carry forward previous year's 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 take a closer look at this list and how it all works.

Maximise your pension allowance

You can add up to £60,000 (or 100% of your annual earnings, whichever is lower) into your pension each year. Remember, you’ll get a 25% tax relief bonus on every contribution 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 previous years allowances

If you’re looking to make a large, one-off pension contribution, there is a way to get even more tax relief. You can ‘carry forward’ any unused allowance from the previous three tax years. After April 5th, any unused allowance from 2020/21 is gone forever!

Claim higher rate pension tax relief

Have you earned more than £50,270 this year? You’re owed extra tax relief on your contributions. Everyone enjoys basic rate tax relief on pension contributions (that 25% we mentioned above), but higher earners can get even more back. 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.

Get your Personal Allowance back

If you earn over £100,000, your personal tax-free allowance (the portion of your earnings you don’t pay tax on) will start to reduce. For every £2 you earn over £100k, your allowance is cut by £1. 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.

Get your Child Benefit back

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.

Swap your bonus for a pension contribution

For many employees, the tax year end comes at the same time as the end of the business year. Asking to have your bonus paid into your pension saves you significant tax, helping you keep more of your money and boosting your savings.

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 by topping up your National Insurance

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 normally be passed on to loved ones tax-free. The person you choose to inherit your pension is known as your nominated beneficiary. Penfold savers can add or review their nominated beneficiary by heading to ‘Beneficiaries’ online or in the Penfold app.

Company director? Trim your tax bill

Pension contributions help Limited Company Directors save on tax in a number of ways. First, any payment into your pension from your business account can be offset against your annual profits - reducing the amount you owe in corporation tax by 19-25% depending on the company profit amount. You can find more information on the HMRC's Corporation Tax charge and rates from 1 April 2022 and Small Profits Rate and Marginal Relief from 1 April 2023 page.

You also won’t need to make any National Insurance contributions on pension contributions. You’ll also get to take money out of your business while avoiding any Dividend tax. A pension is a great way for Directors to make their money go further.

Make your pension work harder!

Navigating pension and tax can be tricky, but we're here to make it as easy as pie. Think of us as your financial friends, here to help you maximise your pension savings. Ready to get started? Get started with a Penfold account and put your pension plan into action!