With tax year end just around the corner, it’s time to check you are making the most of your tax reliefs and allowances to save for a brighter future. You may want to consider:
Recovering personal allowances and child benefit
- Pension contributions reduce an individual’s taxable income. In turn, this can have a positive effect on both the personal allowance and child benefit for higher earners resulting in a lower tax bill.
- An individual pension contribution that reduces income to below £100,000 will restore the full tax free personal allowance. The effective rate of tax relief on the contribution could be as much as 60%.
- Child Benefit is clawed back by a tax charge if the highest earning individual in the household has income of more than £50,000 and is cancelled altogether once their income exceeds £60,000. A pension contribution will reduce income and reverse the tax charge, wiping it out altogether once income falls below £50,000.
Key information
- Adjusted net income (broadly total income less individual pension contributions).
- Relevant UK earnings.
- Pension annual allowance available from current year and previous 3 years.
Please be aware that the value of investments and the income derived from them can fall as well as rise and you may not get back what you invest. The Financial Conduct Authority does not regulate tax advice.
Summary
Effective tax planning is a year round job. It’s only at the end of the tax year that you have all the pieces to complete the planning jigsaw, but there are steps you can take now to get ahead of the game and give yourself time to put plans in place. And with less than 7 weeks until 6 April, there’s no time like the present to get started.