Looking to boost pension and not pay tax on savings

norealnamelol

Im a 56 self employed carpenter and have £10800 in a people's pension.

I have £20000 in ISA

£53000 in cahoot savings account

£15000 in RBS current account

I have a further £45000 coming soon for inheritance.

Im thinking of topping up my pension to get more tax free savings

Is this the best option for me thanks

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6656364/looking-to-boost-pension-and-not-pay-tax-on-savings

Could you just expand a bit more on how you think contributing more to your pension (usually a great idea) will help achieve this?

It could well do but from the information you have provided it isn't clear that it would (it often makes no difference from a paying tax on savings interest perspective).

norealnamelol

I think I'll be hitting the 40% savings tax if that's a thing and thought if I put money in pension it could act like a savings account and and the government also adding 25% to whatever added.

I also thought at my my age I could withdraw the money if needed

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81893618#Comment_81893618

You would get basic rate tax relief added to the pension (25% of your net contribution).

And the gross contribution increases your basic rate band so in that situation it could help with regard to tax payable on savings.

And you do seem to have very small pension provision for someone who is thinking they are a higher rate payer.

Everyone's circumstances are different but some people would be thinking of adding £10,800 each year, not having a total pot of £10,800!

Roughly how much do you expect your business profits to be in this tax year?

Albermarle

https://forums.moneysavingexpert.com/discussion/6656364/looking-to-boost-pension-and-not-pay-tax-on-savings

I think more of an issue, is that you have a lot of money in cash, compared to what you have invested.

If you want to not work another 10 years or more and want a decent income in retirement, you need to boost your pension as much as possible anyway , not to just to save a bit of tax on the savings. For sure you should think about adding most of that coming inheritance to your pension ( subject to the usual limits) and not just saving it.

norealnamelol

I earn about £50000 a year

I also of the sale of a house left to me and there should be another £40000.

Am sure in the thinking if I put all £85000 in pension if I'm allowed I will get tax relief on my income and the government will also contribute to my pension.

All this is new to me and learning as I go and I'm grateful for any advice

Thanks

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81893648#Comment_81893648

What you "earn" isn't necessarily relevant for pension purposes, it's your profit that counts.

If that is £50,000 then £50,000 is the most you can contribute in this tax year from a tax relief perspective. You could not contribute £85,000 (gross) and get tax relief. And the £50,000 would be £40,000 that you pay and £10,000 basic rate tax relief that is added to your pension.

You would still be liable to tax as normal on the profits but you would have a basic rate band of £87,700 instead of £37,700.

One benefit of this is that you would get the full savings nil rate band of £1,000 (interest taxed at 0%).

Albermarle

Of course you can add some this tax year and some next. It is only a few weeks away to the end of the tax year.

The money in your peoples pension would normally be invested ( not just kept as cash), as this would be expected to give better returns in the long run. At some point you should have a look at how it is invested, especially if you add to it a lot.

ali_bear

The best option for you is to pay in as much as you can into your pension from now until you retire. That includes the current tax year (you have about six weeks left). Even if that means your taxable pay is down to 15-20k and you need to use some of your cash savings to live on.

After retirement you will only have the state pension plus whatever you have saved.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81893690#Comment_81893690

Contributing to a pension is not going to make any difference to the op's taxable profits. And they haven't mentioned having a job so there is no pay to reduce.

squirrelpie

All this is new to me and learning as I go and I'm grateful for any advice

It sounds to me that you should be asking your accountant for their opinion of the best approach, and if you don't have an accountant then get one!