A Good Reason to Look at Your Pension Before April 2018

Posted by rachaelbean on Monday 12th of February 2018.

The value of pensions, and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstance and is subject to change.

The ‘use it or lose it’ message behind the option to ‘carry forward’ tax benefits for anyone who’s used up this year’s £40,000 pension contributions tax allowance should not be ignored. For many of our clients, being able to calculate available tax relief allowances and apply them, before the end of this financial year, makes a substantial difference.

Calculating available allowances to carry forward is fraught with technical detail, and it is therefore imperative to receive professional advice first. However, in principle it’s as follows:

If you’ve used up this year’s allowance, you can apply any unused pension input tax relief from up to three financial years ago. So this year you could use up any remaining allowance from tax year 2014/15. If you don’t formally claim the allowance from 2014/15, it will become unavailable to you on 6 April 2018.

It’s not a straightforward calculation, and there are caveats. For example, the allowance falls (but doesn’t totally disappear) if you’ve withdrawn cash from your pension pot or a short-term annuity from a flexi-access drawdown fund, or if your threshold income (excluding salary sacrifice) is too high in certain years.

Our professional pension advisers are available to look at the details, make accurate calculations, and help you secure any additional tax efficiencies available – if you contact them soon.

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