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Tax on UK Pensions
Workplace Pensions
There are different rules about tax on UK pensions. This is dependent on the type of pension and payout scheme. You can call us to discuss tax planning for your pensions.
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UK pensions tax planning
CONSTANTLY SHIFTING
TAX RULES
As your UK pensions, contributions will all benefit from tax rate relief, we can provide you with personal pension tax advice to make sure that the tax relief rules are correctly adhered to. Even changing jobs can mean that you should seek advice from a professional accountant with pension expertise to help guide you through the options available to you. As retirement draws nearer, we can guide you through annuities or other products that can help raise your income level, this may be of particular benefit if you suffer from health issues. Our professional team keeps themselves fully up to date with all developments in the pension field.
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FAQs
We are here to help you with any questions you may have
How is my UK workplace pension taxed?
When you receive your workplace pension, it’s generally taxed as income at your marginal rate. Pension contributions are made before tax is applied, and tax relief is automatically factored into your contributions. This means your pension pot grows more efficiently, but once you start drawing income, it’s subject to the same tax bands as other earnings.
What tax relief can I claim on my pension contributions?
Both workplace and private pension contributions benefit from tax relief. For most savers, contributions are made net of tax, with your pension provider claiming the basic rate on your behalf. Higher or additional rate taxpayers can claim extra relief through their self-assessment, effectively reducing their overall tax bill while boosting their pension savings.
Are private pensions taxed differently from workplace pensions?
Although both types are subject to UK income tax when you start drawing a pension, the contribution and withdrawal rules can differ. For example, with private pensions, you might have more flexibility in how you access your funds, but the same principle applies – you can usually take up to 25% tax-free, with the remaining income taxed according to your income tax band.
How do I pay tax on my pension income after retirement?
If you receive regular payments from a workplace pension, your pension income is usually taxed using the PAYE (Pay As You Earn) system. If you have a private pension or earn money from different sources, you may need to use a self-assessment tax return to report your income. It’s important to keep track of your total income so you can be taxed at the right rate.
Can I reduce my tax bill by increasing my pension contributions?
Yes – boosting your pension contributions can be a tax-efficient strategy. Contributions made to your pension are eligible for tax relief at your highest rate, which not only increases your savings pot but can also lower your taxable income. This dual benefit makes additional contributions a popular option for many savers looking to optimize their tax position.
What are the tax implications of taking a pension lump sum?
Most UK pensions allow you to take up to 25% of your pot as a tax-free lump sum at retirement. Any further withdrawals will be taxed as income. Understanding these rules can help you plan the best strategy for drawing your pension in a tax-efficient way, especially if you’re considering larger lump sums or phased retirement options.
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