Savers can currently pay in up to £40,000 a year into their private pensions portfolio without paying tax. The allowance applies to all of a person’s pension savings together.
Jeannie Boyle, Director and Chartered Financial Planner at EQ Investors, explained: “For the current tax year, the annual allowance is £40,000 for most people.
“The annual allowance applies across all your pension savings, not per scheme. Contributions above this amount will not get tax relief.”
However, Britons may need to look closely at how much they invest in their pensions in a given year, as the yearly allowance is capped at whatever their salary is.
Ms Boyle said: “Take the time to check where your pension savings are. Most people have a few different pensions from different jobs.
READ MORE: Winter Fuel Payment: Pensioners urged to ‘make sure’ they receive £600 payment in account
“It can be hard to keep track of multiple pensions. It can be useful to combine these into one pot so you can monitor the investments.
“With everything in one pot it’s easier to understand if your pension will be enough when you retire.
“If not, you can take advantage of tax relief and top it up. Also make sure that your expressions of wish for pensions are regularly updated – who you choose to receive your pension savings if you die before you retire.”
She also recommended people should structure their retirement income so it comes from several sources.
DON’T MISS
The pensions expert said: “With limits on both the size of pension funds and the contributions you can make, as you plan for your retirement you should consider your income as coming from a range of sources.
“Drawing from several sources allows you to take an income in a much more tax efficient manner, which can be adapted if your circumstances change.”
Another tip she suggested was to put money in a stocks and shares ISA, as a way to “invest for the future”.
ISAs are exempt from capital gains tax and people are not taxed on any income they derive from an ISA.
In the Autumn Statement, the Chancellor announced the threshold for capital gains tax will be halved next year, from £12,300 to £6,000.
READ MORE: New and basic state pension rates – how much you’ll get next year with increase
One option for younger savers is to open a Lifetime ISA, a Government-backed scheme where any money invested gets a 25 percent bonus.
Savers can invest up to £4,000 each tax year into a Lifetime ISA, with a bonus of up to £1,000.
A person must be aged 18 or over and under 40 to open an account, and they can put in up to £4,000 a year until they are 50.
The money has to be used for buying a first home or towards a person’s retirement, and it can be withdrawn once a person turns 60.
A person’s Lifetime ISA can be a cash ISA or a stocks and shares ISA, or a combination of both.
Tommy McNally, leading tax expert and CEO of tax-refund app, Tommys Tax, urged Britons to read up on the new tax reforms announced in the Autumn Budget.
He said: “Taxpayers must ensure that they are aware of the new tax regulations so that they are aware of the correct amounts they should be paying.
“With HMRC under relentless pressure due to the increased number of audits alongside September’s disastrous mini-Budget, people looking to file their tax return should start the process now to reduce any chance of penalties when submitting.
“Our research shows that over a fifth of Brits feel that tax is their biggest financial burden which they are least prepared for.
“With the cost of living crisis, and now a string of tax changes, the number of taxpayers unable to pay their bill is only set to continue rising without adequate information and education around the topic.”
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.
