Tax on Your Pension
Your annual allowance is going up!
The pension annual allowance is the most you can pay into all of your private pensions in a single tax year, and still receive tax relief.
Tax relief is automatic if your employer takes workplace pension contributions out of your wages, before deducting Income Tax. Also, it's automatic if your rate of Income Tax is 20%.
Read more about this and 'relief at source' on gov.uk.
Private pensions are a great way to top up your state pension in the future.
Pension schemes e.g.:
personal pension/stakeholders pensions/'money purchase' (usually arranged by you, the employee);
workplace pensions (usually arranged by your employer);
overseas pensions (check with your provider if it qualifies as an overseas pension scheme).
Please note that this allowance covers all of your combined private pensions – e.g. if you have a personal pension AND a workplace pension, you would split the allowance between those pensions. If you have more pension pots, the same rule applies.
There are limits to your tax-free contributions. It's worth exploring this topic further.
You usually pay tax if the savings in your pension pots go above:
100% of your earnings in a year - this is the limit on tax relief you get
£40,000 a year - check your ‘pension annual allowance’ on gov.uk (Good news! The annual allowance is rising to £60,000 on 6th of April 2023);
£1,073,100 in your lifetime - you usually pay a tax charge if the total value is more than this amount. Your provider will take off the charge before you get your payment.
You also pay tax if your pension provider;
is not registered for tax relief with HMRC;
does not invest your pension pot according to the rules of HMRC.
These are worthy points to note.
We hope you find this information useful. For planning ahead and all pension queries, visit gov.uk for current information.
At MPAS UK, we firmly believe that sharing is caring (except when Luke has the flu) and if you do your research,
you can find the best solution for your future you.
Speaking of Pensions, have you checked your State Pension forecast?
If not, why not?
Don't wait until you're closer to retirement! Check now and see if there are ways to increase your pension before it's too late to change anything. Go to https://www.gov.uk/check-state... (in Welsh and English).
You can use your Government Gateway (a great tool to direct you to everything about you and your details) and you can also fill out a BR19 application form and send it by post, or call the Future Pension Centre. Go to that website above to find out more.
When I carry out a plan that will help my future self (whether that's financially, personally, emotionally etc),
I often say to myself: "No Regrets". Meaning, I want to make sure I've got no regrets when the time comes and change is no longer an option.
It's not easy to recognize when change is needed. Let's face it, none of us like getting older, unless you're a
10 year old... but I'd like to think that I've learnt from mistakes in my youth, and am now making clever choices for my future and my family's future.
Hopefully this inspires you to check your pension pots, make sure they're working well for you or maybe you choose to start your very first pension pot today. Go for it! Small steps.
Your future self will thank you when you're older and wiser.
Let us introduce ourselves...
Hey! We're Jess & Luke.
Together we run Middleton Professional Accounts Services or MPAS UK for short.
A Bookkeeping & Accountancy Business
We help die-hard business owners understand exactly where their
money is going and how it's working for them, enabling them to feel super confident in their business finances and take their business to new heights!
We have not only dedicated ourselves to doing our very best for our clients, as any accountant should, but we are also advocates of keeping things simple.
Our methods have not only helped us scale our own business, but are helping our clients plan and invest in their business' future!