The benefits of paying into a pension before the end of March

Annabel Fay
3 min readMar 30, 2020

Team, the end of the tax year is approaching. 😱

This means it could be an ideal time to review your retirement savings and reduce your tax bill by paying into a pension. This doesn’t need to be a snooze-fest, bear with me. It’s only a couple of minutes of your life to read this. A couple of minutes to potentially save yourself a LOT of money. What else were you going to do? Exactly. Buckle up.

The government is really worried about the fact that we’re all going to live forever and nobody is saving enough money for it. Therefore, you get some cushty little tax breaks if you’re a forward thinker. At team Penfold, we’re forward-thinkers, and we want you on our team. 🙌

For Limited Company Directors: Pay in and reduce your corporation tax bill.

You, my director friend, could put some money into your pension so you declare less profit. How?

  • Pensions contributions paid from your company are treated as a business expense.
  • Revenue — expenses = profit.
  • Profit is taxed. Currently at 19%.

You know you declare all your coffees as expenses? That’s only a fraction of what you can save by putting money in a pension as well.

Yes, your Companies House listing doesn’t look as fancy, but you won’t care when you’re living the retirement of dreams on a beach somewhere. Also, when was the last time you used your Companies House statement as a chat-up line? (If you did, you need to up your game).

Therefore, Directors, you can save yourself a tasty 19% on your corporate tax bill by putting some of that revenue in a pension. (My editor would like me to tell you that contributions must be paid before the end of your company’s financial year in order to count. He’s a bit of a geek — but it’s a reason to get moving!)

For Higher rate taxpayers — Pay in now and reduce your next tax bill!

Not a limited company owner? Don’t worry, you can benefit too! The government literally gives you FREE MONEY if you save into a pension. How does this work?

  • Basic rate taxpayers- for every £1,000 you put in, the government will add £250. We’ll claim your additional 25% for you.
  • Higher rate taxpayers, not only do you get the same top-up from the government, but you may also claim a further 25% back in your tax return.

This is HUGE. If you paid £1,000 into a pension before the end of the tax year, you’d get an immediate top-up of £250 AND your tax bill will be reduced by another £250!

So, let’s summarise.

  • 31st March is the end of the financial year for a lot of companies, so it makes sense to pay in now before you close your books. There’ll also be a new budget coming out on 11th March, and who knows what that will bring for everyone- get it sorted now.
  • Limited company owners can use pension contributions to reduce their profit, and therefore, their corporation tax.
  • For everyone else, you get a 25% top up from the government that we arrange for you.
  • Higher rate tax payers can claim even more back in their tax return — but you need to make that payment before the end of the tax year!

It’s a win-win. Make your tax bill less awful and get yourself set up for retirement with Penfold.

Set up now.

((With pensions, as with all investments your capital is at risk. The value of what you put in may go up as well as down. This blog does not constitute financial advice. In order to benefit from tax relief the pension contribution limit is currently 100% of your income, with a cap of £40,000. If you put more than this into your pension, you may have to pay a tax charge on any amount over the contribution limit unless you have unused pension annual allowance from up to the 3 previous tax years.)

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