October 15th, 2019Watch out for Pension Charges
One great way to reduce tax is to make pension contributions.
These can either be made personally or be made for you by your employer/company.
One thing to watch out for though is your annual allowance limit for how much you can pay into your pension each tax year whilst still receiving tax relief.
The annual allowance is currently capped at £40,000, although this can be reduced to the lowest level of £4,000 depending on your personal circumstances.
This annual allowance applies across all your pension schemes, it is not one limit per scheme.
If you exceed your annual allowance in a tax year, you will not receive the tax relief on any contributions you have made that exceed the limit and you will be faced with a pension annual allowance charge.
For high earners the annual allowance will be restricted and reduces by £1 for every £2 that an individual’s adjusted income exceeds £150,000, down to a minimum of £10,000 for individuals with income of £210,000 or more.
For individuals who have flexibly accessed their pensions the allowance reduces to £4,000.
Depending on the amount of the charge you can request your pension scheme to pay the charge from your benefits, as long as the charge is greater than £2,000.
