Making pension contributions before the end of the current tax year

The current tax year ends on 5 April 2019 and between now and then, each individual can make thousands of pounds worth of pension contributions which are eligible for substantial tax relief.

Why should I make tax-efficient pension contributions?

Simply put, receiving tax relief on pension contributions enables you to invest money into your pension which otherwise would have gone straight to HM Revenue & Customs (HMRC).

How much money can I put into my pension?

You can donate as much money as you like into your pension. However, there are important annual and lifetime limits affecting how much tax relief your contributions will attract.

In the 2018/19 financial year, you will receive tax relief on pension contributions of either:

  • Up to 100 per cent of your earnings, or:
  • Up to the £40,000 annual allowance (depending on which of these is higher).

Any contributions made which exceed the limit will not attract tax relief – which means that these will be added to your overall income and subjected to income tax at your usual rate.

If you do not take full advantage of your allowance, you can usually ‘carry forward’ any unused allowances from the previous three years.

Nevertheless, it is worth noting that there are exceptions to this rule, such as if you are using a defined contribution pension which sees your annual allowance drop once you have started to drawdown your savings.

It is also important to note that the annual allowance might be lower for those who have high incomes of £150,000 or more under rules introduced in April 2016.

To find out more, get in touch with our expert team today.

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