Will Higher Rate Tax Relief on pensions be removed ?

Posted by: on Nov 11, 2011 | No Comments

There is increasing speculation that the government is considering removing higher rate tax relief on pensions.  We can’t be sure whether this will happen, but may it be announced in the 29th November 2011 Autumn Statement.   Last time the government changed pension tax relief, the changes took place with immediate effect, giving pension investors no time to act.

If you are a higher rate taxpayer you may want to consider doing so before 29 Nov 2011.  Personal Pensions are one of the most tax efficient ways to save for retirement. Tax relief is given at up to your highest rate. For taxpayer in the highest rate 50% tax band, £10,000 invested in a pension could cost as little as £5,000. For a 40% rate taxpayer £10,000 invested in a pension could cost as little as £6,000. Currently you to take up to 25% as a tax free lump sum from age 55.

Of course we can not be sure that the higher rate of tax relief will disappear on the 29th Nov, but if you were planning to make a pension contribution this tax year, and have the cash flow available, early action may be of benefit.

Taxpayers can contribute up to £50,000 per year, and there are special rules which allow you to invest more if you have not used up all of the prior year allowances.

Sir Tax Accountants Camberley continue to look for way to reduce clients tax liability. Please feel free to contact us if you require further information 01276 451465.

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