Author Topic: Tapered tax relief on pension contributions (UK)  (Read 1221 times)

Uksaver

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Tapered tax relief on pension contributions (UK)
« on: March 24, 2016, 10:00:55 AM »
My first post here so please be gentle!

I live in the UK and am self-employed.  My taxable profits are around 230k pa so I fall under the new rules for the tapered reduction in pension tax relief for 45% taxpayers.  I have no carry forward left to use.  Consequently, instead of being able to put 40k pa gross into my fund, I'll be restricted to 10k pa gross going forward.

My question is this - where should the rest of my retirement savings go?  The first step seems to be to max out my S&S ISA but that only takes care of just over 15k pa.  So, should I open an S&S ISA for Mrs Uksaver?  Or maybe a SIPP for her?  She has been contributing for over 20 years to a gold plated DB scheme, and is still in that scheme but will retire in a little under 5 years.  She is a 20% tax payer and that is very unlikely to change.

All thoughts welcome.  I had thought about VCTs but those are a little out of my comfort zone.
« Last Edit: March 24, 2016, 10:16:39 AM by Uksaver »

frugledoc

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Re: Tapered tax relief on pension contributions (UK)
« Reply #1 on: March 24, 2016, 03:08:22 PM »
- max out both ISAs will give you 30k per year this year and next then 40k per year onwards
- Pension taper sucks.  I might get hit with it in the near future. 
- Higher rate tax relief on pensions is likely to disappear after the Brexit vote so pensions will become far less attractive anyway, but paying into your wives may become more beneficial.
- EIS and SEIS through a trustworthy site like syndicateroom if you want to risk a bit.
 
It is getting harder to stay on top of tax planning these days!

Uksaver

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Re: Tapered tax relief on pension contributions (UK)
« Reply #2 on: March 25, 2016, 06:11:36 AM »
EIS and SEIS through a trustworthy site like syndicateroom if you want to risk a bit.

My risk profile is quite high, I'm 100% stocks, and the tax reliefs on SEIS and EIS investments are attractive but they seem just a little too risky for me.  I was thinking more about planned exit VCT's that wind up in six years or so after inception as that fits nicely with my time scale.

Playing with Fire UK

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Re: Tapered tax relief on pension contributions (UK)
« Reply #3 on: March 25, 2016, 07:08:57 AM »
I would:

Max out all four S&S ISAs (You and Mrs, this tax year and in April).

Split taxable accounts between you to take advantage of the 2x 5k dividend allowance.

Have a look at where the capital gains are for each of you around March and what Capital Gains Allowance you each have left. Then figure out how to legally harvest enough gains to keep you under the threshold (sell and spouse buys, sell and buy in next years' ISA, sell and buy something slightly different). 

This would shelter the growth but you'd be putting after tax income in.

If Mrs Uksaver will get salary sacrifice on pension contributions (so saving NI contributions on AVCs or whatever), then this is a good shout. If she will have annual tax free allowance left after receiving her DB pension (I think unlikely after 20 years), then also a good shout. If it is just the difference between paying 20% tax now and (20%*.75 + 0%*.25)*(changes in tax policy) as it would be in her SIPP it is probably a wash.

VCTs would be the next logical step, but sounds like they're not for you.

Any Share Save schemes or stock options available to you?