Two signs that you could be due a tax refund!

I realise that pension chat can be boring but in this short article I share some information which could save you £1000’s a year in tax!

Two quick questions:

  1. Does your pension get deducted from your net income (income after tax)? – check a pay slip
  2. Are you a higher rate tax payer? (earning over £50,270/year)

If you answered yes to these questions please read on…

Currently there is full income tax relief on pension contributions (up to certain limits which few reach). Pension providers (like Nest) add a top up to your pension fund assuming you are a basic rate(20%) tax payer if you pay some tax at a higher level (40%/45%) you can claim the back the extra money! You need to speak to HMRC, to refund you any overpaid tax they will either:

  • change your tax code
  • ask you to complete a Self-Assessment tax return

You can claim for a refund for up to 4 years of the end of the tax year when you made an overpayment. If you pay pension contributions from gross income (income before tax), you’ll have received full 40%/45% straight relief straight away without having to do anything.

For more information on this see the following government website, its relevant to some company pensions too:

You may also like Top 3 ways to boost your post-baby finances!

Self Invested Personal Pensions (SIPP)

Due to tax advantages, opening a SIPP(self invested personal pension) can be quite a financially sound thing to do but beware of timescales on being able to access any invested money. One provider of SIPPs which we use for some of our other investments is interactive investor, we have been impressed by:

  • low flat fees which don’t grow with your investment
    • £9.99 monthly cost gives access to ISA, Junior ISA and Trading Accounts
    • an addition £10 monthly gives you access to a SIPP
  • lots of tools to give investment ideas
  • ability to invest in over 40,000 different shares and over 3,000 funds
  • user friendly platform, can even track investments through a mobile App

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