It feels like we've only just had Christmas, but many families have been enjoying half term and Easter is just around the corner. With April on the horizon, that also means the end of the tax year is in sight. It’s only six weeks away! If you have the money to spare, now is the time to top up your pension to take advantage of your allowance and the tax benefits. Let's look at what you should be doing before 5th April.
What Is Your Annual Allowance?
When you look to top up your pension, you need to know how much you can put away per year. This is your annual allowance. Most UK taxpayers can pay up to £40k a year into pension schemes. This could change depending on personal circumstances, such as if you have a high income. If you don't use your allowance by the end of the tax year, you will lose it
Did You Know About The Three Year Carry Back?
Of course, there is the three year carry back rule. Something that many people haven't heard about. If you have maxed out your allowance for the current tax year, you might be able to carry over allowance from previous years if you didn't use it all. This means if you have unused allowance from 18-19, 19-20 and 20-21 tax years, you might be able to top up your pension even further.
Pension Tax Benefits
The more you save into your pension (up to your allowance) the less tax you will pay. This is due to tax relief. This is available on your pension contributions at the highest rat of tax that you pay. Those who are higher rate tax payers get 40% pension tax relief, basic rate taxpayers get 20% pension tax relief. You usually don't have to do anything either, as its taken care of for you. Your pension provider will be able to claim it as tax relief and add it into your pension pot. You can figure out your tax relief by using a tax relief calculator.
How Much State Pension Will You Get?
Whilst some of us don't have other pensions, most of us will be eligible for the State Pension when we reach retirement age. How much will you have to live on from the State Pension? Did you know you can find out how much you could get by logging onto the Government Gateway via this link. This should give you plenty of time to plan for finances and top up your pension ahead of your retirement.
Will you top up your pension before the end of the tax year?