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+44 79 188 63173

ku.oc.tnatnuoccaemraen%40troppus

Tax optimisation with pension contributions

If you decide to join a private pension scheme, you need to inform your employer in writing. Typically, this is a written response to a letter outlining the terms.
You can read more about the scheme in detail via the link:https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay
Here you can adjust the contribution percentage and calculate the payments that you and your employer will make to the pension fund:https://www.moneyhelper.org.uk/en/pensions-and-retirement/auto-enrolment/workplace-pension-calculator
Pension contributions are a good way to reduce Income Tax. If your salary exceeds £50,270 per year, the amount above this threshold is subject to 40% taxation. You can opt for higher personal contributions to the pension fund to keep your taxable income within £50,270 and pay only 20% Income Tax.
For example, with a salary of £51,000 per year — as you can see, with a £51,000 salary and 7% pension contributions, the person reduces their taxable income and pays less tax than with 5% contributions and a salary of £50,270.

Illustration

HMRC adds 25% on top of your contribution, which is a nice bonus. The HMRC limit is that your annual pension contribution must not exceed £4,000.
You can withdraw your private pension at the age of 55, and the first 25% of the accumulated amount is tax-free. How much tax you will pay depends on your individual circumstances. If you decide to withdraw your accumulated private pension BEFORE the age of 55, the tax on the withdrawn amount can be as high as 55%.

The specialists at Near Me Accountant will be happy to help you choose the optimal balance of contributions to your private pension, as well as assist in selecting a provider for such services.