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Don’t lose your Personal Allowance & Year end Pension Planning

1st March 2016 by Chris Bond

Don’t lost your Personal Allowance!

For every £2 that your adjusted net income exceeds £100,000, the £10,600 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

Year end pension planning

Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years. This is generally the difference between the old £50,000 annual pension allowance and your pension input that year and can be added to your relief for 2015/16.  Note that the annual pension allowance is £40,000 for 2015/16 and 2016/17, although those individuals with income over £150,000 will have their annual pension allowance reduced by £1 for every £2 over £150,000.

To avoid losing pension relief brought forward from 2012/13 which lapses 5 April 2016, consider making an additional pension payment before 5 April 2016. If your pension input was £24,000 in 2012/13 then there is £26,000 unused relief available to add to your 2015/16 allowance. You would need to make gross pension contributions of at least £66,000 (£40,000 plus £26,000) to avoid losing this generous relief

Category iconPAYE,  Personal Tax

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