Make the Most of Your Pension Contributions Before the Tax Year Ends

With the end of the tax year fast approaching on Saturday 5 April 2025, now is the perfect time to check in on your pension contributions and make sure you’re taking full advantage of the available tax reliefs. A little planning now could go a long way towards boosting your retirement savings and making your money work harder for you.

Why Act Before the Tax Year-End?

Pensions are one of the most tax-efficient ways to save for the future, thanks to the generous tax relief provided by the government. In simple terms, when you contribute to your pension, the government tops it up by giving you tax relief at your marginal rate:

• Basic rate taxpayers get 20% tax relief automatically.
• Higher rate taxpayers can claim up to additional 20% through self-assessment.
• Additional rate taxpayers can claim up to 25% in extra relief.

By making contributions before the 5 April, you ensure that you don’t miss out on this valuable benefit for the current tax year. If you delay, you could be leaving money on the table!

How Much Can You Contribute?

The Pensions annual allowance is the maximum amount that can be paid into a pension each tax year. This Includes contributions from yourself, your employer, any third party as well as tax relief paid to the pension. The current annual allowance is £60,000. However, you'll only personally get tax relief on contributions up to 100% of your earnings if your earnings are less than the £60,000 annual allowance, or £3,600 - whichever is lower - in each tax year.

However, if you haven’t used your full annual allowance in the past 3 tax years, you might be able to carry forward any unused allowances to maximise your contributions. This could be a great opportunity, particularly for higher earners looking to optimise their tax position.

Making the Most of Employer Contributions

If your employer offers a pension scheme, it’s worth checking whether they match your contributions. If they do, then increasing your own contributions could mean extra money from your employer – effectively free cash towards your retirement. Employer contributions do count towards your annual allowance (up to £60,000, depending on tapering). However, unlike personal contributions, they are not limited by your income, making them an efficient way to add to your pension pot.

New Lump Sum Allowances 2024

The Lifetime Allowance (LTA) was abolished from April 2024, but pension withdrawals may still be subject to taxation. The new lump sum allowances limit the amount of tax-free lump sums, so it’s worth reviewing your pension plans to ensure you’re making the most of the new rules. If you’re unsure how this affects you, seeking financial advice could help you stay on track.

Don’t Miss Out on Tax Efficiency

Pension contributions don’t just help your future self – they can also bring immediate tax benefits. For example, if your income exceeds £100,000, making pension contributions could help you reclaim your £12,570 personal allowance, which is gradually reduced for income between £100,000 and £125,140. This can significantly lower your overall tax bill while boosting your pension pot.

Take Action Today

The clock is ticking! By making pension contributions before 5 April, you can maximise your tax reliefs and make sure you’re making the most of the allowances available to you. If you’re unsure about your options, a financial adviser can help you navigate the rules and ensure your savings strategy is as effective as possible.

At Stringer Mann Chartered Financial Planners, we’re here to help you make informed decisions about your financial future. Get in touch with us today to discuss how you can optimise your pension contributions before the tax year ends.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.

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