Tax Tip #12 PENSION PLANNING
Pensions are a key tool in any financial plan. Whilst there are many areas you should consider, some general areas you should look at in the near future include the following.
It is widely anticipated that the Chancellor will significantly change the tax relief rules for pensions in his Budget on 16th March 2016. Higher rate tax relief may well be removed. If you are considering making a pension contribution, you should act before the Budget.
Pension Input Period (PIP)
Pension contributions receive tax relief based on both your earnings in the year the contribution is made and the annual allowance (currently £40,000). The PIP is used to calculate your pension contributions and tax relief. Recent changes mean that from 6th April 2016, the PIP will run in line with the tax year. However, there are transitional rules in place that mean you can contribute more than £40,000 this tax year. The transitional rules allow you to make contributions of up to £40,000 between now and the end of the tax year. This is on top of any contributions paid between 6th April 2015 and 9th July 2015 (the Summer Budget). You therefore have a limited opportunity to make pension contributions of up to £80,000 this tax year, if you have already contributed the full £40,000 allowance, before 9th July 2015.
The above are just a couple of the pension opportunities that should be considered now. There are many other areas to consider and now is the perfect time to have a full review of all your pension arrangements. Some simple planning today, can make a huge financial difference tomorrow!