48 Financial Advice Continued from page 46 tax breaks so long as certain

stipulations are met. Pensions continue to suffer from a

stuffy and complicated reputation, but these are by far and away the most tax efficient way to save for the long term. Not only are payments made from your gross salary, they also include a compulsory employer contribution, additional tax relief and grow tax free. Pensions are particularly efficient

for those on higher tax brackets since you pay tax on the income at the at the lower rate. Rachael Griffin, tax adviser at

Quilter, says: “From the age of 55, you can get 25% tax free from your pension, after which you’re taxed at the marginal rate.” However, Quilter warns that

pensions are inflexible; once the money is in, it’s not easy to get it out. “If you have limited income and

other lifestyle priorities, these need to be considered before putting into a pension,” she says. While the tax benefits of ISAs and

pensions look attractive, don’t take anything for granted. Buy-to-let is an example of a long-term investment that’s been hit by the taxman. Once seen as a good way to boost

income and provide a long-term savings option, Coles describes buy-to-let as “one of the least tax-efficient options available”. She adds: “When you buy the

property, you’ll pay stamp duty, including the 3% surcharge for second and subsequent properties. When you rent out the property, you’ll need to pay tax on that income, and then finally when you come to sell it, you’ll pay capital


gains tax on a chunk of the price growth you’d hope to pocket.” If all this sounds too complicated,

you could get married. Te government approves of matrimony and civil partnerships, which it expresses through tax breaks. Helen Saxon, chief product

analyst at MoneySavingExpert. com, says: “If you’re married or in a civil partnership, and one of you is a basic-rate taxpayer and the other doesn’t use their full

£11,850 personal tax allowance, then you could transfer some of the allowance to the higher earner and save more than £200 in tax this year. Even better, you can backdate it for four years, meaning you could get back £900 in total.” Managing your tax can be

confusing and the rules change all the time. If in doubt, seek help from a tax adviser, which may cost you upfront but could end up saving you in the long run.

Claim up to £60k income tax relief Written by Adam S. J. Tankard, Chartered FCSI, Managing Director

If you have cash lying around (hope- fully in your bank account), it may be wise to consider using the three-year carry forward rule to make a contri- bution into your pension. Under current rules, you can

contribute up to £40k per annum into your pension and benefit from income tax

relief, whereby the

government gives you money back as an incentive for investing for your retirement. Tis is called the annual allowance. With carry forward, you can look

at your previous three tax years’ worth of unused annual allow- ance, and bring that forward to the present tax year to make a sizeable contribution. Terefore, assuming no pension contributions were made in this year or the three previous years, the maximum contribution into your pension could be £160k. Restrictions do apply. Te Tapered

Annual Allowance comes into effect for people whose earnings (plus other monies) exceed £150k. Also, you can only contribute up to 100% of your earnings in a tax year, regardless of the annual allowance. For simplicity, here, I’ll illustrate how tax relief works on a £150k contribution:

T: 020 3137 7983

Basic rate tax relief Contribute £120k into your pension. Te pension will then claim 20% relief from HMRC. Tis adds £30k in tax back, resulting in a total contri- bution of £150k.


Tankard Wealth Investment Managers is authorised and regulated by the Financial Conduct Authority.

Higher rate tax relief Because your tax rate is 40%, you can claim the other 20% on your self

assessment. If you would like to

In the previous example, this comes in the form of a £30k tax rebate. If your earnings are £150k and no contributions were made in the past, you can potentially receive £60k in tax relief by saving into a pension — £30k in tax rebate on your self assessment, and another £30k added to your pension.

Tis shouldn’t be deemed as finan- cial advice but rather an introduc- tion to the potential benefits of using pension carry forward.

arrange a no obligation appointment to discuss your circumstances, please email or call 020 3137 7983.


• Check your tax code • Save into a pension • Make the most of the ISA allowance • Keep your finances under review • Seek support from an independent financial adviser

Pensions continue to suffer from a stuffy and complicated reputation, but these are by far and away the most tax efficient way to save for the long term


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