Personal pension to lower tax??

ipri

Can purchasing a PP be used as away of lowering tax?? If so , how does it work??

BoGoF

Only if you are a higher rate taxpayer, you will pay less higher rate tax result of paying into a personal pension

ipri

Thanks....my pension will be above 40% rate (some of it!)..wondered if my ifa may suggest this.

purch

Investing in a Personal Pension 'lowers' the amount of Income Tax you pay irrespective of which Tax Band you are in........(in fact if you are a non Income Tax payer and invest £3,600 in a PP annually, you actually receive an Income Tax 'credit' as you only have to pay in £2,808 and HMRC 'gives' you the other £792).....as a Basic Rate Tax payer, HMRC gives you back some of the Income Tax you have paid by sticking it in your pension, as a Higher Rate Tax payer HMRC does the same thing with the basic tax amount, and then reduces part of your higher rate tax obligation when you compete your tax return.