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Tax Tip

Pensions as a tax saving tool

Employer pension contributions are an allowable trading deduction for tax and free of employer NIC.

Employees receive tax relief at source.

A stakeholder pension contribution of £2,880 plus tax relief of £720  equals £3,600 may be made irrespective of earned income.

There are no Benefits In Kind Tax or NIC liabilities for the employee.

The fund accumulates free of income tax and capital gains tax.

At retirement a tax free lump sum (25%) may be received.

The annuity itself received by the retired employee is taxable.

Flexible taxable drawdown is available to individuals who have a secure pension  of £20,000 per annum.

The maximum annual pension allowance is £50,000 for tax relief.

Unused relief may be carried forward 3 years.

The lifetime fund allowance is capped at £1,500,000 from 2012/13.

If you would like to know more about how you can use the Pensions route to save tax and the at the same time secure your pension please get in touch.

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