Currently, making pension contributions is an effective way to reduce tax liabilities - particularly for high earners. Pension contributions currently attract tax relief at up to the highest rate of tax you pay.
The government automatically adds 20% of your contribution to your pension. So, for every £800 you pay in, £200 is added to make a £1,000 total contribution. Every UK resident under 75 can benefit, even non-taxpayers. For self-employed people, this makes a personal pension a particularly attractive option for long-term savings.
Higher-rate taxpayers can claim back a further 20% through their tax return - adding a further £200 to the above example. Similarly, top-rate taxpayers can claim back up to a further 25% through their tax return.
The Chancellor has already signalled that the benefits for higher earners are under scrutiny - perhaps not surprising when the annual cost to the Treasury is estimated at £30bn.
Many experts are predicting that changes will be announced in the Autumn Budget. Clearly, nobody knows what will really happen and the impending General Election only adds to the uncertainty. However, it may be wise to prioritise payments into your pension during this financial year while we know that generous reliefs are still available.