Tax Relief

Pension tax relief: Britons may increase allowance through ‘carry ahead’ | personal finance | Finance

Savers must be wary not to fall foul of the pension annual allowance, which restricts the amount Britons can save into a pension in any given year. However, there are also potential benefits which could come from using the allowance wisely.

The current annual allowance enables individuals to contribute up to 100 percent of their earnings on their pensions, to a limit of £40,000.

People who exceed the threshold could be hit with a tax charge.

There is also another limit which caps the amount someone can save in their lifetime, known as the lifetime allowance.

This works similarly to the annual allowance, but has a much higher threshold of £1,073,100.

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She said: “Savers have the option to ‘carry forward’ unused allowances from the previous three years, starting with the earliest (2018/19).

“The amount of annual allowance they can carry forward will depend on how much they used in the previous three tax years.

“These allowances must include the total value of the contributions they make across all of their pensions, including any contributions made by their employer to a workplace pension, plus the tax top ups they’ve received from HMRC.”

Ms Savova also discussed some of the other benefits Britons can take advantage of relating to their pension, before the tax year ends on April 5.

She explained how even low earners can boost their pension and receive tax relief.

Ms Savova said: “If an individual is a low earner, it’s even more important to put aside some money, and take advantage of the available tax incentives.

“If they earn less than £3,600 annually or don’t earn anything, the maximum amount they can contribute to their pension within the tax threshold is £2,880, bringing the total annual contribution to £3,600 once tax top ups are added.

“If planning to make the most of their unused tax relief, savers shouldn’t wait until the last minute instead taking extra care to ensure their contributions reach their pensions well ahead of the April 5 deadline.”

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