New Years Resolution to Save Tax – Pension Planning

At this time of year, we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5 April. An obvious tax planning point would be to maximise your ISA allowances for the 2017/18 tax year (currently £20,000 each).

You might also want to consider increasing your pension savings before 5 April 2018 as the unused annual pension allowance is lost after three years.

For those looking to do some inheritance tax planning, it would be a good time to review (or make) your Will in light of the recent change in the IHT nil rate band.

Pension Planning

For most taxpayers, the maximum pension contribution is £40,000  each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused.

For higher rate taxpayers the net cost of saving £10,000 in a pension is only £6,000 but this higher rate relief may not last forever.