Thursday, 21 November 2013

How Making Pension Contributions for your Family Members can help save you tax.


Many people are unaware that under current legislation, you are allowed to contribute up to £3,600 gross (£2,880 net of basic rate tax) into a registered pension scheme regardless of your level of income or age.

Therefore, if you wished to contribute into a pension scheme for your non-working Spouse or children, they are then deemed to have made contributions net of basic rate tax even if they are non taxpayers.

Example:

Bobby wishes to increase his family’s pension fund available when they retire.  He makes a contribution of £2,880 into his non-working wife’s pension fund.  The £2,880 contribution is actually worth £3,600 in the scheme and he is able to obtain a tax saving of £720 by doing so.

Bobby also contributes the same amount of £2,880 into each of his four children’s pension schemes which as before, is worth £3,600 in each of their schemes, receiving a further £720 tax advantage in each scheme (£2,880 in total).

The other benefit from this type of planning is that as the children will have started their pension scheme running at a younger age than the typical age of individuals starting a Pension, (around 30 years of age), they will have a considerably larger pension when they come to retire.

For more information please contact tax@taxationuk.com, visit our website www.taxationuk.com, or call us free on 0800 690 6537.

1 comment:

  1. Great blog! Thanks for providing insights on pension contribution for tax saving.

    ReplyDelete