Laura Whitcombe

Last-minute tips to cut your tax bill

The clock’s ticking to shield your savings and investments from the taxman for the 2016/17 tax year, which ends on Wednesday 5 April. But if you’re quick, there’s still time to to take advantage of tax relief that could save you thousands of pounds. Here’s a reminder of the key allowances to make the most of before they disappear – and what the experts have to say about them.

Pensions

‘You should look to maximise your pension contributions before the end of the tax year,’ says Patrick Connolly, a certified financial planner at Chase de Vere. ‘Pension contributions benefit from initial tax relief at somebody’s marginal rate of income tax. This is particularly beneficial for higher and additional-rate income taxpayers who will benefit from a boost of 40 or 45 per cent to what they pay in.

‘There can be other benefits of making pension contributions including pushing your overall net income below a level which protects your personal income tax allowance, which reduces for incomes over £100,000, or entitlement to child benefit, which reduces for incomes over £50,000 a year.’

Tom Selby, senior analyst at AJ Bell, adds: ‘Anyone who has flexibly accessed their pension benefits using the pension freedoms is restricted to making contributions to money purchase schemes for tax relief purposes of £10,000 a year. (This is known as the Money Purchase Annual Allowance or MPAA.) However, the government has confirmed it is reducing this limit to £4,000 from 6 April 2017. People who have triggered the MPAA should therefore consider making a contribution of up to £10,000 in this tax year before the limit is lowered.’

Selby also reminds retirement savers that this is the last chance to carry forward £50,000 of pension annual allowance. He explains: ‘The 2013/14 tax year was the last year to have a pension annual allowance of £50,000.

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