If you have taken out a personal pension plan, do not forget to include this in your tax return. If you are a basic rate tax payer, it will have no effect but if you are a higher rate tax payer, you will benefit from some tax savings.
The net amount you pay into your pension fund is grossed up by the basic rate of tax of 20%. In other words multiply the amount you pay by 100/80 and this figure is entered into your tax return. The basic rate tax band, which is £31,785 for this tax year (2015/16) is then extended by the gross amount you pay into your pension fund which leads to less income being taxed at the higher rate.
There is no limit as to how much you can pay into your pension fund; however there is a tax free allowance of £40,000 a year and a life time tax free allowance of £1,250,000.
You can find lots of pension company offering different types of personal pension plans, although if you are employed you will now most likely be enrolled into the company’s pension plan as it is now required by law. However, what you may not know is that if you are paying into a company pension scheme and your company has a group personal pension (GPP) scheme then this needs to be reviewed to see if it can be included in your tax return. A GPP is a pension scheme that is taken out by your employer but the contract is between you and the pension provider. Check your pension documents and take it to your accountant or contact your financial adviser to see if you can include this in your tax return.
With auto enrolment for pensions in full swing and the tax return deadline just round the corner, this is a good time to make sure you know what is going on.
For more information on this or for help with your tax returns, please follow this link