Top up your pension before the deadline.
It’s the end of the financial year and with it comes your last chance to top up your pension contributions and get tax relief. So, if you haven’t contributed your full yearly allowance (up to a maximum of £40,000) maybe now’s the time to top up.
The last day to do this is the 5th April and if you’re quick you’ll be able to take advantage of this.
If you are looking for specialist pension advice view this page.
As it stands, there’s been no change to tax relief on pensions in the last budget but if rumours are true it’s something the Government want to reform.
What this means for you is that it’s important you claim any tax relief you’re entitled to while you can.
How does it work?
Everyone gets a basic rate tax relief of 20%, so if you pay £800 into your pension, the Government will add £200 on top.
If you’re a higher rate tax payer (40%) you can claim a further 20% through a tax return, whereas those in the 45% tax bracket can claim 25%.
All this adds up to a whopping £41 billion a year the Government pays out in pension tax relief, so it’s no wonder they’re thinking of reforms.
What if I don’t claim my pensions tax relife?
The good news is you’re able to claim back any unused allowance for the last three years, but anything before three years ago can’t be claimed.
This process is called Carry Forward and there’s rules to say whether you’re entitled to it.
Firstly, you need to have had a pension in each year you’re claiming for, even if you weren’t contributing. Plus, you need earnings which add up to the total amount you want to put in your pension.
If you’d like to put in a bigger sum than your earnings, you can do this but may not get tax relief on the amount you add in above this figure. Ultimately, it’s up to you to decide if the penalty for adding in more than your allowance is worth it.
What now?
You need to decide quickly whether you’d like to top up this year’s tax allowance or claim unused allowance. Then calculate what you’re able to put in without incurring a penalty and top up before midnight on the 5th April.
It’s simply a case of deciding what will give you the best possible retirement pot.
