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Tax free investing for UK investors
There are numerous things you can do to invest tax-free in the UK. Here I will look at pensions but I will consider other options in another thread
A thread on how you can utilise pensions
There are numerous things you can do to invest tax-free in the UK. Here I will look at pensions but I will consider other options in another thread
A thread on how you can utilise pensions
You can typically pay up to 100% of your salary capped at ÂŁ40,000 a year into a pension
You will receive income tax relief at your marginal rate. Meaning you can defer your income into a pension tax free
If you pay personally you will get 20% tax relief added by the pension
You will receive income tax relief at your marginal rate. Meaning you can defer your income into a pension tax free
If you pay personally you will get 20% tax relief added by the pension
If you earn over ÂŁ50,000 you will pay tax at 40% and be able to claim an additional 20% from HMRC
Earn ÂŁ100,000 to ÂŁ125,000 and you will in effect pay 60% tax, due to the 40% tax and the gradual removal of your tax-free allowance. This means you will get tax relief of 60%
Earn ÂŁ100,000 to ÂŁ125,000 and you will in effect pay 60% tax, due to the 40% tax and the gradual removal of your tax-free allowance. This means you will get tax relief of 60%
Earn over ÂŁ150,000 and you will pay 45% tax so you will be able to claim an additional 25% relief from HMRC
A note of caution if your earnings are ÂŁ200,000 or higher you might find that your pension allowance is reduced from ÂŁ40,000 down as far as ÂŁ4,000 so be careful
A note of caution if your earnings are ÂŁ200,000 or higher you might find that your pension allowance is reduced from ÂŁ40,000 down as far as ÂŁ4,000 so be careful
If you run your own business or you are employed you might have the option of opting for salary sacrifice when paying into your pension
As a minimum this will allow you to save on the National Insurance you pay, which if you earn less than ÂŁ50,000 is 12% and over that 2%
As a minimum this will allow you to save on the National Insurance you pay, which if you earn less than ÂŁ50,000 is 12% and over that 2%
This means you could get 32% total relief if earning under ÂŁ50,000, and an additional 2% for anyone above this
You might also find your employer will add on top the National Insurance they save. Which would be up to an additional 13.8% on the amount you pay in
You might also find your employer will add on top the National Insurance they save. Which would be up to an additional 13.8% on the amount you pay in
With salary sacrifice you get all the tax relief at source, so don’t have to claim back from HMRC
Paying into a pension separate to your work might seem attractive. However, if your company does offer salary sacrifice it’s probably better to pay into that pension
Paying into a pension separate to your work might seem attractive. However, if your company does offer salary sacrifice it’s probably better to pay into that pension
Salary sacrifice can mean that for every ÂŁ100 you pay in it will cost you as little as ÂŁ59.75 if earning under ÂŁ50,000
Once your money is in the pension it grows free from income and capital gains tax
Then when you come to draw on the pension you get 25% tax free
Once your money is in the pension it grows free from income and capital gains tax
Then when you come to draw on the pension you get 25% tax free
The remaining 75% is taxable as income, although you won’t pay National Insurance
For most people the pension income they have will mean that they pay no more than 20% on this
So on average you might pay 15% or less on the money coming out
For most people the pension income they have will mean that they pay no more than 20% on this
So on average you might pay 15% or less on the money coming out
This will result in almost all people paying less tax on the way out than they saved on the way in
The big drawback of a pension which I would argue is also the big advantage is that you can’t access until age 55 (57 from 2028)
Lastly there is a Lifetime Allowance of ÂŁ1.073m
The big drawback of a pension which I would argue is also the big advantage is that you can’t access until age 55 (57 from 2028)
Lastly there is a Lifetime Allowance of ÂŁ1.073m
Which you ideally want to stay within otherwise these is tax of 55% on the excess
Used right pensions can assist you in building wealth far quicker than ignoring them
Used right pensions can assist you in building wealth far quicker than ignoring them
