Pension planning before the end of the tax year

with No Comments

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2016/17 will lapse on 5 April 2020. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000.  Or for owners of small companies you could pay £10,000 of your profits into pension with no tax charge OR suffer the corporation tax (19%) and pay out a dividend and suffer dividend tax (32.5% on the dividend) leaving £5467 in your hand.

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.