Six pension tips you could try before the end of the tax year

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5 April is the last day of the current tax year. And there are things you can do before then that could potentially benefit you both now and in the future. Here are our top tips. 

1. Understand your pension annual allowance

Your pension annual allowance is the total amount that can be paid in across your pension plans in a tax year before a tax charge could apply. It’s currently £60,000 or 100% of your earnings – whichever is lower. But it could be less if you’re a higher or non-earner or if you’ve started taking money from your pension savings. You can find out more on MoneyHelper.

Once you know what your allowance is, it’s worth checking how much you’re currently paying into your plan and making sure that’s still right for your circumstances.

If you’ve already used all of your annual allowance for the 2023/24 tax year, you might be able to carry forward unused allowances from the last three tax years. Check GOV.UK to find out who can and can’t do this. 

2. Get to grips with pension tax relief

Tax relief basically means a person’s payments into a pension plan get topped up by the government. How much of a boost you can get depends on the amount of income tax you pay.

For example, if you pay income tax at the basic rate of 20%, you can get a 20% top-up from the government on your payments into a pension plan. This means it’d cost you £80 to pay in £100. And it’d cost you less if you’re a higher or additional-rate taxpayer. Keep in mind that if you’re a higher or an additional-rate taxpayer, you may need to claim tax relief back from the government through a tax return, as they won’t automatically add anything above 20%.

Some workplace pension schemes (for example, salary sacrifice or salary exchange schemes) offer tax benefits in a different way. Check with your employer how this works for you if you’re not sure.

3. Ask about your workplace pension plan

Got a workplace pension plan? Your employer usually has to pay in too. At least 8% of your ‘qualifying earnings’ usually needs to be paid in. A minimum of 3% usually comes from your employer, while a 5% minimum typically comes from you.

Some employers will match the percentage you’re paying into your plan up to a certain amount. So it’s worth checking with them to see if they’d be willing to do this.

4. Consider bonus sacrifice

If you get a work bonus, you might have the option to put some or all of it into a pension plan. Doing this could save on tax and National Insurance deductions, meaning you could potentially keep more of your bonus in the long run.

5. Get your tax-free personal allowance

Your ‘personal allowance’ is the amount of income you don’t have to pay tax on. It’s £12,570 for the 2023/24 tax year. 

When your taxable income is more than £100,000, your personal allowance is reduced by £1 for every £2 above this amount. You lose the personal allowance once your income is £125,140 or more.

Paying into a pension plan could reduce your 'adjusted net income', so it could help you recover some or all of your personal allowance depending on how much you put in.

6. Get your child benefit back

Got kids and getting child benefit? Worth over £2,000 a year to a two-child family, child benefit is currently reduced by the ‘High Income Child Benefit Charge’ when one parent’s income reaches £50,000. At £60,000, the tax charge cancels out the benefit entirely. 

Remember, paying into a pension plan could reduce what counts as income – so it could help you get some or all of your child benefit back. Use the government’s child benefit tax calculator to work out if you’re affected by the tax and how.

In his Spring Budget, the Chancellor announced that from 6 April, you’ll only be affected by the charge if you earn £60,000 or more. And your child benefit will only be cancelled out completely if you earn £80,000 or more. 

Even if your earnings mean you’ll the face the High Income Child Benefit Charge, it’s worth filling in the child benefit claim form. This can help you get National Insurance credits, which go towards your State Pension.

Preparing for the end of the tax year

Before the tax year ends, you might want to check in on how your pension plan is doing and make sure your payments are still right for you. You may be able to do this if you have an online account with your provider or on their app, if they have one. If you’re a Standard Life customer, you can find out more about our online services on our website. For help, FAQs and ways to get in touch, visit our support page.

 

The information here is based on our understanding in March 2024 and shouldn’t be taken as financial advice.

A pension is an investment. Its value can go down as well as up and it could be worth less than was paid in.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.

Your own personal circumstances, including where you live in the UK will have an impact on the tax you pay. Laws and tax rules may change in the future.