If you remove cash from your pension pot, then 25% of the amount you withdraw is tax-free and income tax will be liable for the remaining 75%. You have a personal income allowance of £11,000 on which you need not pay pension tax and, pleasingly, any tax-free amount withdrawn from a pension will not eat into this allocation.

Employees’ Tax Relief on Pension Contributions

Provided the employee is under 75 then tax relief is available on pension contributions up to 100% of their salary. The employee and their employer will remain liable for any National Insurance contributions due.

Pension tax relief is usually limited to £40,000 annually and there is no tax relief on contributions more than the annual allowance although there are exceptions to this, providing you have unused allowances from previous years.

Pension Tax Planning

The way in which tax relief operates varies depending on your particular pension scheme. Usually, with occupational schemes, employee contributions are paid in without any tax being deducted and so the employee is automatically provided tax relief at whatever rate of income tax they usually pay.

Personal pension schemes are paid into from an individual’s taxed income and the pension plan then claims back basic rate pension tax relief. Those who typically pay higher rates of income tax will claim back the difference via their own self-assessment returns.

Tax relief on employers’ pension contributions

Pension Tax Advice
Money spent on employers’ pension contributions can usually be claimed back as a business expense, providing the pension scheme conforms to government guidelines. Should a pension contribution be larger than normal then pension tax relief may be spread across a period of up to four years.

Neither employer nor employees’ national insurance contributions are payable so tax relief on pension payments is more beneficial if made by the employer and not the employee. Work based pension contributions count towards an individual’s annual allowance and any contributions that take the total over the allowed amount will be liable for income tax. Employers are automatically required to enrol eligible employees into a pension scheme and are obliged to make contributions to that scheme.

Pension Contributions and Tax Planning for Owner-Managers

Tax relief available for pension contributions made by self-employed people works in the same way as for employees. If you happen to own your own business, then the company may only make pension contributions if you are also an employee of the company, in which case the usual rules apply.

Business owners should think of pension contributions as part of a larger approach to tax liability minimisation. You can, for example, choose to use your pension scheme to invest in your business premises.

High earners and business owners should remember that there is a lifetime limit on pension funds. If the value of your pension exceeds £1m, then you will be liable for tax on the excess, whether taken as a lump sum or in retirement.

  • Tax Advice
  • Lump Sum
  • State Pension tax
  • Private Pension tax
  • Bought Life Annuities

Pension Tax Advice

Pension Tax Advice

If you get any income from your pension, you also need to pay tax from your own income. There are some important things that you have to know, in order to help you calculate the overall tax for your pension income. It is very recommended for you to calculate this tax properly, so you can avoid any tax issues that may occur on the future. You also need to consider your tax-free income before you get the right tax for your own income. You can read this article for finding the best tax advice, especially if you want to calculate your pension tax properly.

When you are in the pension period, you need to learn about some types of incomes that can be taxed legally. There are several types of incomes that can be taxed, such as state pension, private pensions, earnings from self employment or regular employment, and any other taxable benefits that you can get during the pension period. You have to calculate and also manage all assets that you have after you get pension from your company now. This article is going to learn about how to calculate the pension tax correctly without any tax issues that may occur in the future.

Tax on Pension Lump Sum

Tax on Pension Lump Sum

When you reach age of 55 years old, you are going to have defined contribution or DC pension. This pension saving allows you to take about 25 percent of the lump sum tax free from this detail. You need to pay income tax on any income that is more than 25 percent.

When you want to withdraw your tax on pension, you are going to be involved in the Pay As You Earn (PAYE) system. You will never have to work with self assessment tax return when using this calculation. Therefore, you can reduce any complicated things that may occur during the tax filing procedure in your daily life

Tax on State Pension

Tax on State Pension

You need to understand that state pension is not tax-free income. The money that you can get from this pension can be considered as gross amount without any deducted tax. If your total income (that includes state pension) is more than your own tax free allowance, you are required to pay tax for your state pension. This pension tax can be deducted from any earnings or private pensions via PAYE system. You also need to pay your income or pension tax to the HMRC directly, in order to avoid any tax issues in the future.

Tax on Private Pension

Tax on Private Pension

If you want to take a good care of your pension tax, you also need to look at this type of tax. In most cases, income from private pensions can be paid with the tax via PAYE system. The tax office is going to send special tax code to your own pension providers. However, you need to make a copy of your PAYE income, in order to help you check your own tax properly. When you don’t receive any tax codes, you can simply contact HMRC at anytime you need.

Tax and Bought Life Annuities

Tax and Bought Life Annuities

If you buy annuities with your pension fund money, you need to learn more about this product. Most life annuities are actually insurance products that you can purchase with your cash lump sum. These products are going to pay income for your own life. Therefore, these products cannot be exempted from your own tax payment. Purchased life annuities should be treated differently from pension fund. You need to know that the return of your capital is usually tax-free. However, the rest of this income may be taxed with the total of 20 percent of its total life annuities.

You need to learn about how you can plan your own retirement properly. It can be an important decision that you are going to do, in order to make your life easier. When you are preparing for your pension or retirement period, you have to get a professional adviser today. This type of adviser can guide you through any options that are available nowadays. You should never leave your retirement period as granted. You have to make the right choice, especially when you want to have comfortable retirement without getting any stressful situations now.

Pension Tax With The Accountancy Network