Why you should increase your pension contributions before the tax year ends

Dafferns Wealth

The end of the tax year is fast approaching, so now is the time to act to make sure you’re not paying more tax than you have to.

One of the best ways to do this is to maximise your pension contributions.

Contributing to your pension is one of the most tax-efficient ways to save for later life, as the money you put away is deducted from your taxable income.

That ultimately means you can end up paying less income tax in the current tax year.

Basic rate taxpayers can enjoy an automatic 20 per cent tax relief on pension contributions, while higher and additional rate taxpayers can claim even more tax relief.

Using your pension as a means of reducing your tax liability has the added bonus of boosting your retirement savings.

That, in turn, can help to put you on course to achieve the financial freedom and security you want and deserve in later life.

The earlier you begin saving for the future, the more you’ll have in the long run, as your money will have longer to benefit from compound interest.

So it’s well worth looking at how your pension can support your wider financial situation and ambitions sooner rather than later.

Remember that there is a limit to how much you can contribute to your pension while still receiving tax relief of £60,000.

Known as the annual allowance, this is tapered for higher earners, which means it’s reduced by £1 for every £2 a person earns over £260,000 (including pension contributions).

If you can increase your pension contributions before the tax year ends on April 5th, you’ll be in a great position to make the most of your annual allowance and simultaneously boost your retirement nest egg.

Of course, managing your tax affairs can be hugely complicated, and you might not even know where to start.

That’s why we’re here to answer any questions you may have on reducing your tax liability and setting up your wider finances so you never have to pay more than is necessary.

Please get in touch with our specialist team of financial planners and we’ll be happy to speak with you and help you make the most of your money.