Festive Tax Tips

As the countdown to Christmas begins, we thought we would bring you our own special Festive Tax Tips.

Festive Tax Tip: Pension Planning

How healthy is your pension pot? On April 6 2011, HM Revenue & Customs reduced the amount of tax relief you can claim for making pension contributions. In simple terms, HMRC limited higher rate tax relief to a maximum of £50,000 per year. It was announced in the Finance Bill this month that HMRC intend to reduce the £50,000 even further to £40,000 per year from 6 April 2014. However, the rules are more complex than they first seem (for example, you may have unused relief brought forward that can be utilised). Now is therefore the time to review your pension to see if it needs to be “topped up”.

In addition to the annual allowance reducing, the lifetime allowance is also reducing from £1.5m to £1.25m and funds in excess of this will give rise to a potential tax liability of 55%.