Professionals with annual salaries in the region of £100,000 will soon be able to benefit from a clever tax quirk that allows them to invest £11,213 in a pension but only contribute £2,243 themselves, a report in The Telegraph suggests. By applying straightforward tax planning measures, high earners can counteract tax regulations that came into force in 2011 by reducing their taxable income and reclaiming their personal allowance.
“High earners were stung last year by the government’s decision to gradually withdraw the personal tax allowance once earnings exceed £100,000,” comments Owen Kyffin, Tax Partner, Whitley Stimpson. “By making a pension contribution, those who earn £100,000-£114,950 can eliminate the 60 percent tax band to which they are subjected within this band, and in doing so, dramatically enhance the tax efficiency of their pension fund.”
By taking advantage of the tax loophole identified by The Telegraph, a professional aged 55 or over who earns £114,950 could contribute just £2,243 to a pension contribution of £11,213, from an initial gross outlay of £14,950. The process would work through a combination of reclaiming their personal allowance, tax relief and their right to claim 25 percent of their pension immediately as tax-free cash.
Oxfordshire-based accountancy firm Whitley Stimpson is encouraging high earners in the region to consider how they might benefit from a greater understanding of this and other relevant tax quirks. The firm’s tax specialists have provided sound financial advice to individuals and businesses for more than 80 years, and successfully assist high earning professionals to navigate the myriad of regulations surrounding tax to achieve the most beneficial outcome.
For further information or to book an appointment with one of Whitley Stimpson’s tax specialists, please visit www.whitleystimpson.co.uk or call 01295 270200.