Could you take advantage
of 'hidden tax relief' on
If you have a taxable income in excess
of £100,000 you may be aware that
you can receive tax relief of 40% on
your pension contributions.
However, did you know it could be
possible to receive up to 60%?
How to achieve 60% tax relief
Your personal allowance is reduced by £1 for every £2 of taxable
income above £100,000. Your personal allowance is how much
you can earn before any income tax is due. The personal allowance
is currently £7,475, if you are under 65. This means if you have
income in excess of £114,950 you will have completely eroded your
personal allowance. Many people may be unaware that they can reduce
their income by making a pension contribution and therefore helping them
reclaim valuable personal allowance.
If an individual who has a taxable income between £100,000 and £114,950
makes a contribution that takes their earnings below £100,000 they could
reclaim their full personal allowance as well as getting 40% tax relief on
their contribution resulting in tax relief of up to 60% for individuals earning
between £100,000 and £114,950. If an individual earns above £114,950 they
can still claim some their personal allowance back if their taxable income, after
the contribution has dropped below £114,950.
With higher rate tax relief under review, the opportunity to achieve tax relief
of up to 60% on pension contributions may be short lived. Before making a
pension contribution you should seek professional financial advice.
This newsletter is prepared for general information only. Nothing in it should be taken as an offer, invitation or inducement to engage
in investment activity. Alliance Trust does not give financial advice. Please remember the value of investments and any income from
them can go up or down and you may not get back the amount you invested. All investments carry an element of risk, which may
differ significantly, and if you are unsure as to the suitability of any particular investments, you should seek professional financial advice.
Foreign markets will involve different risks than UK markets, in some cases the risks will be greater. The potential for profit or loss from
transactions on foreign markets or in foreign currency denominated marketswill be affected by fluctuations in foreign exchange rates.
We do not give advice and the inclusion of particular stock names is not intended as a recommendation. You should remember that the
amount of tax relief depends on your individual circumstances and that the beneficial tax treatment of ISAs may not continue in the
future. Information relevant to 2011/12 tax year unless otherwise stated.
This information is based on our understanding of current tax law and HM Revenue & Customs (HMRC) rules. Legislation and tax
regulations are not guaranteed and can change at any time. Current tax advantages may change and could be withdrawn; tax rates
and reliefs may change and depend on individual circumstances.