The Annual Allowance For Pension Contributions
Are you worried you're paying in too much?
POSTED BY HELEN BEAUMONT ON 05/10/2018 @ 8:00AM
We're halfway through the tax year and our thoughts are turning to filing tax returns for the year ending 5th April 2018. I've been asked about the annual allowance for pension contributions ...
The annual allowance for pension contributions could catch you out if you're a high earner!
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A number of my clients are worried that the pension contributions they are making are too large and think that they may be breaching the annual allowance.
A number of years ago, if you could afford to, you could pay in as much as £255,000 and receive tax relief on all of those contributions. Today, those same people may now be restricted to paying in as little as £10,000 per year.
"A pension is the most tax efficient way to save for your retirement!"
Your savings are boosted with tax relief on your contributions and your pension pot usually enjoys tax efficient growth. And you can take a lump sum tax-free when you retire, usually 25% of your total. It really does pay to ensure you're getting the most out of your pension, so a regular review is always useful.
According to HMRC, whilst you're actually saving into your pension, there is no limit to the contributions you can make, but there is a limit to the amount you can save before you face a tax bill. This threshold is known as your annual allowance.
Currently, the normal annual allowance for tax year 2018/19 is set at £40,000. However, certain mitigating factors may cause you to have a lower annual allowance.
Your threshold could be reduced for a number of reasons, including:
A reduced annual allowance for high earners
A 'threshold income' of above £110,000 per year
You have already accessed your pension pot
I highly recommend you have a regular tax and pensions review, especially if you are a high earner worried about reaching your threshold income or are considering accessing your pension pot in the near future.
"Would you like to know more?"
If you'd like to find out more about the annual allowance for pension contributions or would like to arrange a tax and pensions review then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
If you're looking to work with an expert tax advisor with a wide range of tax experience, do visit www.essendontax.co.uk to find out more about me and discover how I can help!
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen’s specialist knowledge in tax planning and experience ensures every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.