Adding money to a pension offers a tax-efficient way to save for retirement, and an opportunity to cut your tax bill in lots of ways. This includes the potential to lower your income tax liability and shelter long-term investments from dividend and capital gains tax.
You can normally get a top up from the government in the form of tax relief on contributions into your pension. And the first 25% taken out from a pension from age 55 (rising to 57 in 2028) is usually tax free.
How much tax relief will I get?
If you’re a UK resident under 75, you’ll automatically get 20% basic-rate tax relief added to anything you pay into your personal pension – even if you don’t pay tax.
You can usually pay in as much as you earn up to £40,000 each tax year across all your pensions and get tax relief. If you earn £3,600 or less (including non-earners) you can still pay in up to £3,600, including tax relief.
If you’re a higher-rate taxpayer, the tax benefits are even more appealing. You can claim back up to a further 20% or 25% in tax relief through your tax return. Scottish taxpayers pay different rates of tax and could claim up to 26% in tax relief.
Pension and tax rules can change, and benefits depend on your circumstances.
TAKS Limited is not regulated in giving financial advice on savings and investments and above articale intends to highlight
the tax reliefs and tax savings
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