The tax year end is still a few months away but with pension tax relief under review, and significant change already announced in the Summer Budget, leaving tax year end pension planning until the last moment may not be the best idea.
Things to consider to help maximise the planning opportunities:
Pension top-ups – is now the time? Three key changes mean one should consider prioritising pension top-ups this tax year:
- Higher 2015/16 Annual Allowance (AA): The AA overhaul means a potential extra £40k AA for this tax year
- Lower 2016/17 AA: Some may face a reduced AA of £10k from 2016/17.
- Tax relief review: The current review could signal the end of higher rates of tax relief on pension contributions.
Next year’s dividend tax changes create another reason for business owners to consider boosting pension funding. Going forward, company pension contributions may be the most tax-efficient way to extract profits from their business.
Finally, ‘at retirement’ for those that are planning to use the new pension flexibility may want give their pot one last funding boost before doing so, to make the most of unused AA and available tax relief before their AA is cut to £10k (with no carry forward).
In summary, the changing tax framework, and a new world of pension freedom and choice, creates a window of opportunity for those ready to act. But there’s a lot to do and consider before Tax Year End.
Optimum Independent Financial Advisers can offer this advice and we work with our clients to provide appropriate and bespoke tax and pension planning.