At this time of year, it can be a good time to brush up and review the various ‘allowances’ that might apply to you. Here is a checklist of five key areas to review.
1. Get to know your allowances
The pension annual allowance. This is the total amount that can be paid into a pension plan before a tax charge could apply. It is currently £60,000. To make the most of the tax benefits a pension plan has to offer, some people like to use up as much of their allowance as they can in a tax year.
You can find out more about the pension annual allowance and when your allowance might be different on The Money Helper website. Other allowances that are worth looking into include: marriage allowance, capital gains tax allowance, dividends allowance and Individual Savings Account (ISA) allowance.
2. Check whether you can claim pension tax relief
You can get tax benefits when you pay into a pension plan. These can work in different ways for different people.
If you put money into a plan after you have been taxed, your pension provider claims back some or all of the tax you paid on that amount. They will add it to your plan as ‘tax relief’.
But they will only claim back tax at a rate of 20%. If you pay tax at a rate higher than that, you need to claim anything above 20% from the government yourself. You can usually do this through a self-assessment tax return or by contacting HMRC.
Not everyone needs to claim tax back. If you have a workplace pensions, relief is often automatic, before tax is taken. More details on pension tax relief can be found on the Government website here.
3. Keep your contact details up to date on your pension plans
Check that the details on your pension plans, like your home address, are correct. This helps your pension providers contact you with important information.
It’s also worth making sure your providers have a personal email address on record for you, not just your work one. That makes it easier for them to get in touch if you leave your job.
You can normally check and change your contact details online or through your provider’s app, or by contacting them.
Beneficiaries – check the details on your pension for beneficiaries are up to date, and consider checking your will, and any POA that is in place. Legal advice is recommended.
4. Check your payslips
Your tax code, which is made up of numbers and letters, determines how much income tax is taken from your pay. It is important to check that you are on the right code. You can find your tax code on your payslips, P60 and you can learn more about tax codes on GOV.UK. And you can use the tax code checker to discover what your tax code means. Check the other aspects of your payslip look right? If not, this might be something to ask your employer.
5. Find out whether you need to send a self-assessment tax return
Tax returns need to be submitted annually, online for each previous tax year, along with paying any tax you owe, by 31 January. You might need to complete a form for various reasons – for example, if you’re self-employed, renting out property, high income child benefit charge, Partnership or Company Director, Investment or Dividend income of over £10,000, or your total taxable income is over £150,000. You can check on this page on the Government website to establish if you need to complete a tax return.
