Navigating tax year end

Hello.

I'm Sarah Pennells, and I'm the Consumer Finance Specialist here at Royal London.

Hi, I'm Clare Moffat Pensions Expert at Royal London, and today we're going to be talking about how you can save tax, navigating tax year end. And actually what does that mean.

Well you have inundated us with questions in a good way. We have had hundreds of them. Now we always look at the questions and answer some of the most popular ones during the webinar. As with all our webinars, we can't give financial advice, but we will explain some options and steps you can take. If you'd like to ask a question as we go through. We will leave some time at the end to answer them and we would love to hear from you. But as with all our webinars, we can't answer a question that is about your specific circumstances or a Royal London policy. If you'd like to leave a comment to ask a question, you can do so via the Slido link. Before we go any further, just a couple of housekeeping points. We are recording this webinar and we will share a link to the recording afterwards with everyone who registered for it. And also if during the webinar the streaming freezes, please refresh your page and that should resolve the issue.

So Sarah, we're talking about tax year end and what that means for pensions and ISAs, how your pension can save you tax and some changes that are happening in relation to ISAs. But where do we start?

Well should we start by talking about the tax year end, which is a month away on April the 5th. Before we talk about what it is and why it matters. Let's have our first poll.

So choosing one answer.

Which of these do you think takes place at the end of the tax year?

So, this is interesting.

Yeah, yeah.

So we're doing about 50/50 split at the moment of… I'm saying this and it's changing, it's changing all the time. So the wonders of polls, but a lot of people are getting the right answer, which is great. So it's when tax allowances for pensions and ISAs run out. So at the moment about four out of five people are saying that some of this is saying when you have to file your tax return. And others saying it's only important if you're self-employed or a business owner.

So that's brilliant.

Now, in the UK, if a new tax year begins on the 6th of April every year. Normally this would be the time that any increases or decreases to tax or national insurance rates take place. But tax year end is also important because it's a date that the new allowances and limits apply from. And we'll talk about some of these during the session.

It also means that before the end of the tax year, there can be some opportunities to save tax if you haven't used up all of these limits. And a bit later on, we'll talk about the action that you might want to take before the 6th of April.

So let's start by talking about pensions. I will say at this point that we're going to try and avoid financial jargon where we can, but there are some terms that you'll come across if you have a pension or an ISA that it's important to understand. So where we use financial terms will explain them.

However, if there's anything we've said that you don't understand, just ask a question. It's kind of nothing worse than being confused by a phrase early on in the webinar and struggling to catch up. So pensions are often described as a tax efficient way of saving for your retirement. And one of those tax benefits is tax relief. Now, whenever we do these webinars we always get asked about tax relief. So we think it's important to explain.

And Christian was one of those who sent us a question in advance. And he asked, could you tell us more about additional tax relief on pension contributions? And we had quite a lot of similar questions from Catherine, Caroline, Yasmin and others.

Before we answer Justin's question, we're going to think about how tax relief works for a basic rate taxpayer. If you're employed as a sole trader and you pay income tax. The easiest way is to explain it with an example. If you've joined us for a few of these webinars, then you will have seen this example before. But because of the amount of questions we get, it's always worth going over it. So let's look at this slide.

If you pay £80 into your pension and you're a basic rate taxpayer, then the government will top that up by £20. So that 100 pounds goes into your pension. If you're a higher or additional rate taxpayer, then you'll get the extra tax relief at the higher or additional rate of tax. So that would bring the total tax relief to £40. Or if you're an additional rate taxpayer, £45.

But, and this may have been what Christian wanted to know about, you make it that extra tax relief automatically or you may have to claim it from HMRC. So just to repeat this, because it's a point we get so many questions about if you're employed and a higher or additional rate taxpayer, you are entitled to tax relief at the higher rate on your pension contributions. But you may not get that higher rate tax relief automatically as you do with tax relief at the basic rate.

We've had a question from Abbey-Louise, who asks, can you advise on the process to reclaim pensions higher rate tax relief? And can I just do this or should I get specific advice before contacting HMRC? So what's the answer? Well, you can either reclaim the extra tax relief and your tax return if you fill one out, claim it online or by writing to HMRC.

However, if you are a member of certain types of workplace pension, like a public sector pension, then you won't need to claim that extra tax relief back because you'll get the full benefit automatically.

If you're a member of a salary sacrifice pension. And we'll explain what these are later, then you also don't need to claim back any tax relief. Now that isn't straight forward. So if you don't pay tax at the basic rate of tax and you're not sure whether you need to claim the higher or additional rate of tax relief, check with your employer or with your pension company. In Scotland, the amount you get in relief is the same if you're a basic rate taxpayer, but different if you pay one of the higher rates of tax. And that's because higher earners in Scotland pay more tax.

Now we've had a question from Simon who wants to know about pension contribution limits. And this is something that we also get questions about in most of our webinars. But I think it's one that's front of mind for more people as we approach the end of the tax year. If you're employed or you’re contracted worker, the rules will let you pay in up to 100% of the income you get from your employer, including any overtime or bonus payments, and still get tax relief.

So if for example, you earn £40,000 a year, including overtime and bonus, you could pay up to £40,000 into your pension and you'd get tax relief on those contributions.

However, if you earn £60,000 or more a year, then there's another limit that could influence how much you pay into your pension. It's called the annual allowance. The annual allowance is a limit on the amount you can pay into your pension in any one tax year without having to pay a tax charge, and it's currently £60,000.

So if, for example, you earned £70,000 a year and were in the unusual position of being able to pay it all into your pension. The rules would still let you do that. However, you'd have to pay a tax charge on the contributions above the annual allowance limit of £60,000.

Now, Clare and I did a pensions and tax webinar in November where we went into the annual allowance in much more detail so do have a look at that if you'd like to know more. And links to that webinar and any guides we mention will be on the Useful Links section of the web page below.

Now, because tax rules around pensions can be a bit complicated, you may be able to pay extra into your pension even if you've already paid in £60,000 during the current tax year.

And that's by using something called carry forward. So sorry, I'm aware the pensions jargon is coming thick and fast at the moment.

In simple terms, carry forward.  Let's you go back up to three tax years and use up your unused annual allowance from those years.

It's something that it's useful to be aware of if you're thinking about maximising your pension contributions ahead of the end of the tax year, and you're in a position to pay a large amount into your pension.

If you want to understand how carry forward works, it's something else we cover in a lot of detail in our webinar last November. And Clare has written a guide to annual allowance and carry forward. If you're thinking of using carry forward, especially if you have a defined benefit pension, such as if you're in the public sector, then it's worth getting financial advice.

So we've talked a bit about the limits and how much you can pay in and get tax relief or not face a tax charge. And we're focused on people who are employed. But we had a question from Kim who says I'm retired. If I had a lump sum to my pension pot, can I claim tax relief on it? Are there limits to their investment amount? Well, the answer to that is yes. If someone isn't working so they don't have any earnings and money from a pension doesn't count as our earnings, then they or someone on their behalf can still pay a maximum of £2,880 a year into a pension and get 20% top up by way of tax relief. The tax relief at the basic rate means £3,600 actually goes into their pension and anyone can have a pension, even children. Imagine your child's face when they get to another pension for their birthday. Well they will thank you when they are older. Actually often the people paying into children's pensions are grandparents because they want to help with their grandchild's future. Now, whether you're paying into a pension for yourself or for someone else, you can only get tax relief on your contributions. Up until your 75th birthday. Once you reach 75, the tax relief stops. Now, I'm guessing most people won’t want to pay into pensions or will be working at 75, but it is worth being aware of.

Okay, so let's have another poll.

We'd like to know what paying a lump sum into your pension can do.

Hopefully this question makes sense when you see the answer options.

So please vote using Slido.

Okay, so, just waiting for a few of the votes to come through.

So at the moment, well, people are getting the right answer, which is great.

Yeah.

I'll wait for this to build a bit more.

It is good because again, this is something that we get a lot of questions on, isn't it? Is actually the whole relationship between pensions and tax and about paying more.

But full marks, you know, prizes all round frankly, because at the moment nine out of ten of you are getting the right answer, which is both of the above.

And this links to a question that was submitted in advance from Lucy. And she wants to know what the benefits are of paying extra into your pension and if you can save tax. And the answer that the poll shows is that pensions are a tax reducer and could mean you move into a lower income tax band.

Let's explain how.

If we look at this slide, we can see that the amount of income tax that someone living in England and earning £51,270 a year would pay. If they didn't pay anything into their pension, then they'd pay £7,940 of income tax. But if they paid £1,000 into their pension pot, then the income tax payable goes down to £7,740 and they have £1,000 in their pension. How does that work? Well, in the calculation they were paying high rate tax on £1,000 pounds of earnings. But pension contributions get taken off the amount to be taxed. That means instead of paying tax on £51,270 pounds, they're now paying tax on an income of 50,000 and 270 pounds and £50,270 is the higher rate tax threshold. Only earnings above that level are taxed at the higher rate. Now there are other situations where paying more into pension can help you reduce your tax bill. One of these is where you live in a household with children, and one person earns between 60,000 and 80,000 pounds, and child benefit is being claimed.

You might get a pay rise and it just pushes you over that £60,000 threshold. And thanks to the child benefit high income tax charge. Sorry, more jargon. You know that you'll have to pay tax if you carry on receiving child benefit. But before you think about opting out of child benefit, take off any pension contributions from your income. You might find that this takes your income to below the £60,000 threshold, and if it doesn't, then paying a little extra into your pension starting before the end of the tax year and then continuing, it could mean that you get more into your pension. Your income falls below £60,000 and you keep the child benefit in full. In a similar way, if you earn between £100,000 and £125,140 pounds a year, you end up losing some or all of your personal tax allowance. So that's the amount you can earn or receive before you pay tax. And if you have children, you could lose childcare help. Getting your earnings to under £100,000 by paying more into your pension could save you money.

Another area that we get a lot of questions about and one that confuses many people, is salary sacrifice. Now, you might have heard or read more about salary sacrifice around budget time in November last year, and we've got a few questions on this, including one from Gemma who asks, is there still a benefit to doing a pension salary sacrifice? Now, before we answer that, let's explain what salary sacrifice is. The salary sacrifice or it can also be known as salary exchange. You exchange some of your salary in return for your employer paying all of the pension contributions on your behalf. One of the benefits of salary sacrifice is that you save National Insurance on the salary you exchange. In the budget last November, the government announced some changes that are going to take place, but not until 2029. There has been some confusion about these changes. The announcement from the government said that from April 2029, you and your employer will only benefit from these national Insurance savings for pension contributions under £2,000 a year. But that doesn't mean that salary sacrifice wouldn't still exist, as it is still a benefit for you and your employer for those pension contributions under £2,000 a year. And there have been no other changes announced to the way that pensions can save you tax, so making pension contributions will still reduce your income tax bill.

It's worth repeating one of the other benefits to salary sacrifice. And that is the fact that if you're in a salary sacrifice pension scheme and you pay higher or additional rate tax, then you don't need to claim that extra tax relief back.  If you receive a bonus through your work, your employer might offer bonus sacrifice as well. That works in the same way. If you'd like to know more about salary or bonus sacrifice, there's a guide about it that's on the Royal London website and a link from the webinar page. One last thought on salary sacrifice, is that our workplace pension research shows that around 1 in 4 employees with a workplace pension made use of it last year. Approximately a third say that employer doesn't offer it. Well, 1 in 4 don't know if it's on offer. So a vast majority of employees who have a workplace pension won't be affected by the changes the government announced in the budget, as they don't currently use salary sacrifice.

If you're thinking of paying extra into your pension for whatever reason, you may be able to get even more money towards your retirement. And that's through something called employer pension contribution matching or employer matching. With employer pension contribution matching, your employer will match your pension contributions pound for pound, up to a certain limit. So let's explain this with a couple of slides. Under the current rules, the minimum amount that currently goes into your workplace pension through automatic enrollment is 8% of your salary. You pay 4% of your salary into your pension. You get 1% in tax relief, assuming you're a basic rate taxpayer and your employer pays 3% of your salary into your pension every month. Now that 3% is money that comes from your employer, not from your wages. But with employer matching, your employer might match your contributions up to a limit of, say, 6% of your salary. In that case, if you paid an extra 2% of salary into your pension, that would increase your contributions from 4% to 6% of your salary. But some of that would come from the government as tax relief. Your employer would also pay 6% of your salary into your pension, so a total of 12% of your salary would go into your pension. So that means that instead of 8% going into your pension, 12% of your salary goes into your pension every month, but you would only have to pay an extra 2% of your salary.

Now, I am aware this may be beginning to feel like a maths lesson, so let's show you how this could work in pounds and pence. In this example, on a monthly basis, the employee pays £80 into their pension. The government tops it up to £100 and the employer pays in £100. So a total of £200 a month goes into the employee's pension. But if the employee agrees to do matching to the maximum, then they would pay £120 a month into their pension, the government would add £30.In this case, the employer would then pay £150, so total of £300 goes into the pension. But it's only costing the employee an extra £40 for that extra £100. And remember the point that we made earlier the more you pay into your pension, the less tax you pay because pension contributions reduce taxed earnings. Starting to meet changes like this before the end of one tax year, and then continuing into the next tax year, means that you benefit from the tax reduction in both years.

So that's the theory. But how can you actually pay more into your pension. So if you can afford to pay more into your pension. There are two ways you can do this. The first is to increase the amount that goes into your pension every month. Now, if you're an employee, then check with your employee benefits website or ask your HR department about this.  The second way of paying more into your pension is to pay a lump sum.

And we had a question from Quinten. He asked, I always top up my pension near the end of the tax year. Is it better to increase my monthly payment to my pension through my employer? Well, the answer to that is well, it depends. Now Sarah just spoke about employee pension matching and it might be that your employer will pay in more if you pay in more. So check that first. But it also might be that you don't want to commit to higher monthly payments. And you'd prefer to see how much money you've got left at the end of the year, and then work out what you can pay in. So if you want to pay a lump sum into your pension, how do you go about that? Well, in broad terms there's two options. The first is for you to directly pay a lump sum to your workplace pension provider. That money will go into your pension with basic rate tax relief. So if you pay an £800 for example, £1,000 will actually go into your pension. And if you're a higher rate taxpayer, additional rate taxpayer explained earlier, you can also claim back the extra tax relief by filling in a self-assessment tax return or claiming. And if your employer offers bonus sacrifice, which we've also talked about, you could pay a lump sum into your pension using that instead. For higher earners who want to pay a lot into their pension, then you do need to be aware of the annual allowance that Sarah mentioned earlier, that £60,000 limit, which if you pay more into your pension, you may have a tax charge.

Well, Clare and I have talked a lot about pensions, but at the end of one tax year and start of a new one is also the time when you ISA allowance resets. And unlike with pensions you can't carry that allowance over. And we've had lots of questions about ISAs for this webinar. For example, Delia asked if we'd recommend topping up an ISA. As I said at the start, we can't give financial advice, but there are a few things to think about if you have an ISA and you're not sure whether to pay more into it before the end of the tax year. It's probably worth briefly recapping how ISAs work, not least because some research we carried out last year found that two thirds of UK adults don't understand the full benefits of Stocks and Shares ISAs.

So let's have another poll at this point.

Let us know whether you think you pay income or capital gains tax on any profit you make in a Stocks and Shares ISA, so do vote now using the Slido link.

Well, I have to say with all these poll questions you're doing amazingly well.

You're getting all the answers.

Right.

So, none of the above. Almost nine out of ten over eight out of ten. So cake all round.

Frankly. Well done.

Well, we'll explain this as we go along. But firstly, there are several types of ISAs. If you would like a short explanation because you know the answers. But anyway, there are several types of ISAs or individual savings account, including Junior ISAs and Lifetime ISAs. But for the purposes of this webinar, I'm going to focus on Cash ISAs and Stocks and Shares ISAs. These are the main types of ISAs, and the ones have been available since ISAs were launched over 25 years ago. Cash ISAs are very similar to ordinary savings accounts, except you don't pay any income tax on the interest you earn with the Stocks and Shares ISAs your money is invested rather than saved, but you don't pay income or capital gains tax on any profits or when you take money out, as you rightly said, and voted in the poll. Under the current rules, you can save up to £20,000 a year in a Cash ISA, or you can invest up to £20,000 in a Stocks and Shares ISA, or you can split your money between them. Now, we had a question from Caroline, who wanted to know if interest on a Cash ISA counts towards the 20,000 annual Cash ISA limit, and it's a great question, Caroline, but the answer is no. Any interest or gain if you've got a Stocks and Shares ISA doesn't count towards the annual ISA limit. That limit only applies to money that you pay in. It also doesn't apply to money you've transferred directly from another ISA.

Now we had questions from John and Kumar who want to know if you can open several ISAs in one tax year, as long as the amount you put in doesn't exceed the allowance of £20,000. And the answer is yes. Now you have been able to take out a Cash ISA and a Stocks and Shares ISA in the same tax year since they were launched in 1999. But from April 2024, the rules were relaxed and you can now have more than one Cash ISA and more than one Stocks and Shares ISA in any one tax year. Whether you have a Cash ISA or Stocks and Shares ISA or both is down to you. And to answer Delia's question, it is also a personal decision as to whether you top it up. The advantage of putting money into an ISA ahead of the end of the tax year is that you secure that allowance.

It is worth touching on a couple of changes to ISAs that are due to be introduced in a years time in April 2027. This is something that Graham asked about the first change, and the one that has generated most comment and interest, is that the amount you'll be able to save into a Cash ISA will fall from £20,000 a year to £12,000 a year if you're aged under 65, and this won't affect any money you've already saved in cash ISAs. Only money you pay in from the start of the tax year in April 2027, and only if you're aged under 65. Our research shows that only 16% of ISA holders saved or invested the full £20,000 allowance. Most people paid in less than £5,000 a year. However, the reduction in the cash ISA well, it will definitely affect some people.

One other change that's being introduced at the same time is that you will no longer be able to transfer money that's in a Stocks and Shares ISA to a Cash ISA. Instead, you'll have to take money out of your Stocks and Shares ISA if you want to put it into a Cash ISA. And that means it will count towards your annual Cash ISA allowance. So you'd only be able to pay in up to £12,000 a year.

Now, this change also doesn't apply to investors age 65 or over. Now, the government has also announced it will be replacing the Lifetime ISA with a new product, although this won't be introduced until 2031. LISAs or as it LISAs, let you save or invest up to £4,000 a year. There are restrictions on who can take one out, and you can only use it to buy your first home or towards your retirement.

That plan change is something that Rebecca asked about. But Rebecca, we don't have any more detail on this at the moment,  

So that's an ISAs.

But we've had a lot of questions about the interaction between pensions and ISAs. Mark asked. I'm retiring in less than five years. Should I transfer money from a Cash ISA to my pension to maximize benefit, due to time taken off work I'm not a higher rate taxpayer this year. Well the answer to this is it really depends on what Mark uses his ISA for and how old he is.  If he never touches money in it and he is using it to save towards his retirement, then it makes sense to take it out tax free and then pay it into a pension and get the benefit of tax relief and reducing his tax bill. However, remember the rules we spoke about earlier in relation to the maximum you can pay into pensions?

Emma wants to know if it's more tax efficient to pay into an ISA, overpay or mortgage, or add to her pension fund. She says I'm 54 and working full time paying 40% tax. Pros and cons to watch for would be useful. Well, pensions on a numbers basis always beat ISAs and overpaying your mortgage, and that's because of the benefits of tax relief. However, it's not just about the numbers. If you're younger and you might need access to your money, then paying more into your pension isn't a good idea. And many people want to overpay their mortgage to get rid of a debt they've had for a long time. Once it's paid off, then many people pay more into their pension. But for someone who is close to the age where you can access pensions, which is currently 55 and increasing to 57 in 2028, then there are more advantages to paying more into your pension, as you could take out your tax free cash quite soon afterwards. So if Emma wanted £5,000 to go into her pension, she'd just need to pay in £4,000. But £5,000 would be deducted from her taxed earnings. And because Emma could claim another 20% back, that pension contribution, would actually only cost £3,000. If she wanted to access her tax free cash, then in a year she could and she could ask for 25% tax free cash of £1,250.

What about the practicalities? When thinking about tax year end for ISAs and pensions and getting money in before those deadlines. It's important to know when they are. And Matt asked well, a lot of banks and pension providers want money sooner with tax year end falling on Easter Sunday.

As Matt said, tax year end April 5th is on Easter Sunday, so it may come around faster than you think. And it can be really important to make sure that your payment is in the correct tax year. When providers or companies accept payments, up until depends on them. So it's worth checking in advance. They may accept pension contributions or investments until April the 5th for the current tax year, but it could… The last day could be the Thursday before Easter or even earlier.

Now, Stephanie had a similar question to Matt, which was whether it's too late to set up an ISA before the end of the tax year. The answer is probably not. May well not be. Most ISA providers can set up an ISA very quickly. If you have a financial adviser, then they will keep you right on all these deadlines.

And there's one other change that's taking effect from the start of the new tax year, April 6th. It's not strictly related to the end of the tax year, but we get a lot of questions about state pensions and the state pension age rise. So we thought we'd give it a mention. From April the 6th, the state pension age will start rising from its current level of 66 to 67. So that's the age that you have to be before you can claim your state pension. That increase will take place over a two-year period. This means if you were born between the 6th of April, 1960 and the 5th of March 1961, your state pension age will be between 66 and 67. For example, if you're born between April the 6th and May the 5th, 1960, you'll be able to claim your state pension when you're 66 years and one month old. But if you're born between the 6th of February and the 6th of March, 1961, then you have to wait until you're 66 years and 11 months before you can claim your state pension. From April 2028, the state pension age will be 67, and this affects you if you're born on the 6th of March, 1961 or later. Now, that means you will not be able to claim your state pension until you reach 67 years of age. Now, I've written a guy that explains exactly how the state pension age rise will work and who will be affected. There's a link to this on the page below.

So we've covered a lot in the last 30 minutes, but we're keen to answer some of your questions. So let's have a look Sarah.

Well, I thought we'd go to one from Sue, which was just came in a few minutes ago. So how do you calculate how much ISA allowance is used in a Stocks and Shares ISA? Because the value can go up and down. And again I think like Caroline's question about whether interest on a Cash ISA counts towards your ISA allowance. I think it's a really good question.

Now basically, you don't need to worry about what happens to the value of your Stocks and Shares ISA, when it comes to your ISA allowance, what's important is what you've paid in. And as I explained when I was talking about Caroline's question, it's what you pay in from your bank account or your savings account or whatever. It's not, you know, value that comes from the interest or from the gross that you might get on your Stocks and Shares ISA.

So don't worry about it. It's actually what you've paid in. And again, if you've transferred money from another ISA, whether that's Cash or Stocks and Shares, that doesn't count as well. As long as you've made the transfer directly from one ISA to another. So all you need to worry about too is the money you've paid in when working out, whether you've used your allowance or not.

So let's look at a couple of other questions.

I think, Clare, you've probably answered this one already, which is a question from Brian, but maybe it's worth just reiterating, which is whether it's better to put money into a pension or into an ISA, or high interest ISA when you're reaching the age of 60.

So again, I think it depends on if you're working or not working. So if at 60 you're still working because you need those earnings to be able to pay into a pension, then, you know, and certainly if you're at a higher additional rate taxpayer, it's even better. But even as a basic rate taxpayer, you're going to get that 20% top up straight away. So from, you know, again, on a numbers basis, it really works. When you take money out of a pension, then you do get 25% tax free and you pay tax on the rest. But it's that uplift at the beginning that's that's really important.

Thank you for that.

So we've had another question which is from Vicky. Now this is a similar to one we had earlier on, I think, I can't read the name of the person who submitted it early on, but again, probably just worth reiterating. So, if you are just over the 40% tax bracket, is this whole question about pensions being a tax reducer, which again, is so important? We always get questions on this. So is it worth increasing pension payments if you're just over that threshold, which I was talking about in the webinar and you discussing as well.

Yeah.

And I think we had that example of when, you know, it was you were £1,000 into the higher rate threshold, then actually it's going to reduce your tax bill and you're going to have that money in a pension. So it works out really, really well actually.  So just getting you know, underneath the tax threshold is okay, you get the 40% tax relief from the bit that's above the higher rate threshold, but then you're only paying tax at the basic rate. So it's a really good idea.

And Sarah, you spoke about some of those tax traps. So again there's points where if you can, you know, bring your pension contribution just under them, then that works really, really well and bear in mind that it doesn't need to be a pension contribution made by you. We spoke about other people can pay pension contributions on your behalf, but it's the person receiving the pension contribution that gets the benefit of tax relief. So if you are just into that high income child benefit tax trap, that really lovely jargon. And you know, but you think, well, I actually even though I know it's a really good idea to get just under that, but I can't afford to make that contribution then sometimes what we see is maybe grandparents paying a pension contribution for their adult child, and that gets them just under that threshold. And so yeah, so that's a good one to think about.

You and you talked earlier on Clare about, you know, imagine the joy on your child's face if you gave them. But you could actually ask for pension contributions, your birthday present as a grown up. How fab would that be? Amazing. Really good

So, one of the question, which is so Kimberley's asked a question of is there a deadline on how late you can claim the tax relief back? So again, I think this is talking about this additional tax relief where you're not in a pension, where sort of salary sacrifice, where you don't have to do anything, do you have to act by certain deadline.

Yeah, so, so if you're doing your tax return, then you normally you're doing it the time and the tax return.  If you do self-assess, it's quite self-explanatory. It’ll talk you through how it works. There's good kind of information boxes that will help you out on this. If you haven't been claiming it back and you should have been claiming it back, then you can make this standalone claim online, or you can write to HMRC and you've got four years that you can go back to claim any extra tax relief.

So I've had a question from Clyde, which again is about additional pension contributions. So can I make additional monthly payments from PAYE to cover previous years unused allowance, or do you have to kind of pay in a wad of money in a, in a lump sum.

So again, we often see things like it depends, don't we, that's kind of what happens. Well you often say it depends. It really so when we're thinking about the the annual allowance and I think this is what Clyde's getting at here. The annual allowance is only relevant if you're earning over £60,000 a year. And that's because you have to use the current year's annual allowance before you can go back and look at those previous three years. But if you're at a very high earner.

So see, you're earning £200,000. And, you know, perhaps you're kind of nearing the end of your career and you think, well, actually, I would like to pay £100,000 into my pension, then you would use £60,000 from this year's annual allowance, and then you would go back and use £40,000 from the previous year's annual allowance.

And now Sarah, you mentioned that, I had written a guide on this.  So there's a good example about using annual allowance in carry forward there. So have a look at that one.

There's a couple of questions that are sort of related.

So Samantha’s just said what form do we need to complete to claim back the higher rate tax relief, there’s different ways of claiming, claiming it back? Maybe it's just worth recapping.

Recapping on those.

So there's three ways your self-assessment tax return and you can make a standalone claim online, or you can do it in writing. So for for most people, probably they're either going to do it into tax return or they're going to make that claim. So you can just do a Google search on Gov.uk actually, and it will take you to if you search for pensions tax relief and it'll take you to the right place and you can fill that in there.

So another question we've had from Fergal is that can one put £60,000 into a pension and an additional £20,000 pounds into an ISA and save tax on the full amount, which again, really good question.

That is a good question. And yes, these are two completely different things. So it's a good idea to use as many of your allowances as you can. Again, just a reminder that £60,000, you need to have the earnings to support that. If you're a director of a business the rules are a bit different, and we have spoken about that in the past as well. But we did it in the November because this is a bit more complex. But if you're an employee, then, you know you have to have the earnings to support that. But it's a really good idea to make use of as many of the tax allowances that you can.

Okay. Great stuff. Thank you Clare.

So another question.

This is from Michael who says if I take 25%, if I take my 25% tax free cash lump sum and go into drawdown, can I still pay into my workplace pension?

Okay. So this is something that we have covered before doesn't it. So you know that we so when you start taking money out of your pension, a defined contribution pension. So one of the pension pots, if you take more than your tax free cash, so you've got £100,000 in your pension pot, and you take out your £25,000 as tax free cash, and then you start to take maybe a monthly income because you've actually stopped working. Then you are restricted in how much you can pay into, your pension and you're actually paying into the pension part again. So it's not into that sort of drawdown section. You're paying to pension pot, but you're restricted to being able to pay in £10,000 a year. And that's because you've got the benefit of accessing that money flexibly. So for if you've stopped work, then that's not an issue because you wouldn't be able to pay in £10,000 anyway.

But lots of people take some money out of their pension and, and are still working. So I see, especially if you are at a higher or additional rate taxpayer. But for for many taxpayers then, you know, you just taking your 25% tax free cash is a good idea. And then moving the decision to drawdown, if you want to take more than that 25%, or if you're taking one of those cash lump sums that we talk about as well, you'd also trigger that money purchase annual allowance, and be restricted to £10,000. So so that is the restriction. Again, we've got guides and information on this, on our website.

Okay.

Thank you for that.

Now, we've had a question from Tanya who says, what if you're a sole trader wanting to pay more into your pension? And again, this is something we've talked about in more detail. But is it something you just kind of cover and give us an idea of because it is slightly different if you're not somebody who's employed or kind of on a contract.

So it depends. I can I always say it depends. It depends if you're a sole trader and you are paying income tax. So if you're paying income tax, you have the rules that apply for employees are the same rules that apply. If you are a director of a limited company and it's, you know, often there's sort of one director and, that that's the kind of the way your company's been structured, then it's different rules. And that's because you get corporation tax relief when you pay into pensions. And again, this is something we cover done a fair amount of detail before is a bit different how the rules in corporation tax relief work. But again whichever way it works, paying pensions is really good from a tax relief point of view. If you're a sole trader and you pay income tax, then the same rules apply. So if your profits from your business are £50,000 and that's what you're paying income tax on, then that's the amount that you could pay into your pension, for example.

Now we've had a question from Rochelle who says how can I find out and gain access to ex-employer pension pots without payslips? And again, this is one that quite often comes up. A And we again often talk about something called a pension tracing service. So I think it depends on how much information you have about your previous employer. So if you if you know, you know the name, you got their contact details or you may even know who your pension is with and contact them, you don't need the payslips to be able to kind of claim your pension. I think where it gets a bit more not necessarily complicated, but where is it? Maybe a different system is if you can't remember who you employ with, or maybe they've been taken over by the companies, you don't know their current name. Now there is a really useful and free to use government resource. It's called the Pension Tracing Service and again it's on the Gov.uk website. What you can do is put in the name that you know of your previous employer. So even if it's a company you left a number of years ago now, they won't go sort of scurrying around and find the pension for you and kind of bring it to you. But what they will do is give you the up to date contact details so you can find out if you have a pension there, if so, how much it's worth and all that kind of stuff. And then you need to contact the the organization whose name is there, because things need things like your National Insurance number so that they can verify that you are who you say you are. But that's a really good way. And it's it's free for you to use to track down your pension. I think the last time we talked about this, Clare estimates show there's something like £31.5 billion in lost pensions.

And like the average pension that's being claimed is it's a few thousand pounds, isn't it? So for those people who have lost track of their pensions and it does happen, especially as we, you know, we we switch jobs and things, it's really worth doing and it's free to use do use on the government websites.

And so documents are being sent somewhere else. So it's a it's a really good idea to work out if you do have any. And lost pensions.

I think we'll just sneak in in the closing minutes. One extra question that's just come it literally a minute ago, the person didn't leave the name says, what happens to my state pension if I don't take it at 66? But wait until I'm 70. I'm a highest rate taxpayer.

And again, really good question. Now we did a freedom of information request and we found out that in the year I think it's 23, 24, about 40,000 people claimed a state pension that they deferred.

So let's go back a bit. If you don't need your state pension, if you are a higher rate taxpayer at the moment, then by not doing anything, by not claiming it, that will start the deferral process and all that means. It just means that you delay claiming it. Now, if you're somebody who reached state pension age after April 2016. So in your in your case you will be then the amount extra that you get by deferring it works out about an extra 5.8%, a year. Then you have to defer for a minimum period. I think it's nine weeks, so you will then get an extra income when you choose to get your state pension. So we know that it's something that some people do. It's at about 41,000 people claimed a state pension that they deferred. It can make sense for some people, but it doesn't make sense for everybody. And again, I've written a guide to deferring your state pension, which is on our website. And so you can read all about it, the pros and cons and where it may people it may work for.

So thank you very much for that question. I think that is all we have time for. I'm afraid we don't have time to answer any more questions. But before we go, we have got one last poll and it's not a test.

This time, it's what topic would you like us to cover in future webinars? So please vote now using the Slido link.

Okay.

Right.

So I think I have to say from the questions that you have has we've said on inheritance tax and pensions it's not a surprise. So at the moment I mean the poll numbers are still rising. So it may change. But we're getting a really strong, steer that people want to know about what happens to your pension when you die, including inheritance tax and pensions. And obviously that's something that is going to be changing.

So in April 2027, we're going to see a change on there. So it has been a really hot topic. I do think it's one of the things we're being asked about the most. We're still waiting on some of the final legislation to come out. So I think soon as we've got that kind of information that's our topic will definitely be covered in

Well, that's all that we have time for. We will be sharing a link to the recording of the webinar in the next few days. But in the meantime, thank you very much for all your questions, and thank you for joining us today.

Thank you.