How to boost pension savings and reduce tax

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Quilter
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Supported by
Quilter
How to boost pension savings and reduce tax
More than 1mn people are forecast to be pulled into higher tax bands by 2027 (Jose Sarmento Matos/Bloomberg)

Quilter’s head of retirement policy, Jon Greer, says it is good practice to submit a tax return early. “Not least that overpayments of income tax during the last tax year will mean you receive money back sooner rather than later,” he adds.

Nearly 66,500 customers filed their 2021-22 tax return on the first day of the new tax year, according to HM Revenue & Customs.

 

Indeed, leaving a self assessment tax return until the January deadline means a taxpayer has to wait at least nine months, or perhaps longer, to receive their tax relief, says Canada Life technical director, Andrew Tully.

Parents earning more than £50,000

For taxpayers subject to the high-income child benefit charge because they or their partner get child benefit, and either have an individual income more than £50,000, making a pension contribution could reduce or eliminate the charge.

 

The charge is equal to 1 per cent of a family’s child benefit for every £100 of income that is more than £50,000 each year. If an individual’s income is more than £60,000, the charge will equal the total amount of the child benefit.

“Individuals will also receive tax relief at their highest marginal rates on the pension contribution,” notes Tully. “This can mean tax relief of close to 60 per cent. In other words, for each £1,000 in the pension, the government has effectively paid around £600. That’s a fantastic outcome, if people are able to afford the payments.”

Chloe Cheung is a senior features writer at FTAdviser

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