avoiding tax via Pension.

bizwax

Hello..

First post here, but i've been lurking a while. Just came across Stoozing.. interesting stuff.

Anyway, I came across a calculator which shows potential rewards. It asks about tax rates. I'm guessing this is due to tax on gains via savings accounts.

To avoid the tax, couldn't one just add the gains to their pension account. I'm planning on setting up a SIPP.

The SIPP provider would automatically add 20% to your pension and if you're into a higher tax rate then you can reclaim via your end of year return.

The problem with this is that you don't have access to the cash, but that's fine with me if i'm ultimately going to end up better off. i.e. no tax. :T

What to people think?

MallyGirl

if you have no access to the cash how are you going to pay off the 0% card at the end of the 0% period?

bizwax

Sorry, I should have been more clear.

I mean to put only the interest from the savings account into pension to get the tax back. The capital remains outside the pension and can be returned to the credit card when required.

Basically, in a usual setup you are free to spend the money you make from the savings account. But I am proposing putting into the pension to get the tax back. Therefore you get to keep 100% of your interest and the taxman gets nothing.

Man_on_fire

c-j-h wrote: »

Hello..

First post here, but i've been lurking a while. Just came across Stoozing.. interesting stuff.

Anyway, I came across a calculator which shows potential rewards. It asks about tax rates. I'm guessing this is due to tax on gains via savings accounts.

To avoid the tax, couldn't one just add the gains to their pension account. I'm planning on setting up a SIPP.

The SIPP provider would automatically add 20% to your pension and if you're into a higher tax rate then you can reclaim via your end of year return.

The problem with this is that you don't have access to the cash, but that's fine with me if i'm ultimately going to end up better off. i.e. no tax. :T

What to people think?

Technically you are deferring the tax rather than avoiding it, but yes it will work, it's also what I'm planning on doing to avoid the reduction on child tax credits from increased income, since our children will have grown up when we claim our pensions.

Dan83

You won't pay tax now, but you will be taxed on your pension.

Tax rates rarely go down, in the long run you could be best paying tax, banking the interest and getting abit more interest on it ever year, you will have to work out the numbers

Thrugelmir

Dan83 wrote: »

You won't pay tax now, but you will be taxed on your pension.

Depends on when and how you draw it.

[Deleted User]

c-j-h wrote: »

Hello..

First post here, but i've been lurking a while. Just came across Stoozing.. interesting stuff.

Anyway, I came across a calculator which shows potential rewards. It asks about tax rates. I'm guessing this is due to tax on gains via savings accounts.

To avoid the tax, couldn't one just add the gains to their pension account. I'm planning on setting up a SIPP.

The SIPP provider would automatically add 20% to your pension and if you're into a higher tax rate then you can reclaim via your end of year return.

The problem with this is that you don't have access to the cash, but that's fine with me if i'm ultimately going to end up better off. i.e. no tax. :T

What to people think?

That's exactly what we do, all stoozing profits, switching bonus's, RHI, FITs, Quidco all gets chucked in a SIPP for flexibility. Some of the above is paid tax free some is taxed at source, either way tax relief is added Plus growth of ~7% growth in the last 5 months alone...


Cheers

Superscrooge

Isn't it the case that the first £1,000 interest will be tax-free anyway from April?

CLAPTON

Superscrooge wrote: »

Isn't it the case that the first £1,000 interest will be tax-free anyway from April?

for a standard rate payer then yes (500 for a 40% payers)

however, the tax benefits of a pension remain