Smart Pension Planning: Reduce Your Tax Bill and Plan for the Future

At Numeric Accounting, serving businesses and individuals across Salisbury, Southampton, and the surrounding areas, we believe good tax planning is about more than just saving money today; it’s about securing your financial future.

One of the most effective ways to achieve both is by making pension contributions. Whether you’re running a business on Salisbury’s historic high street, managing a company near Southampton Docks, or working as a self-employed professional, pension contributions could help you:

  • Save for retirement
  • Reduce your current tax bill
  • Manage critical income thresholds

 

Here’s what you need to know.

 

Why Are Pension Contributions So Tax-Efficient?

Pension contributions come with several valuable tax advantages:

✔ Income Tax Relief

When you pay into a pension, the government tops up your contributions with tax relief.
In simple terms, some of the money that would have gone to HMRC is invested in your future instead.

✔ Lower Your Taxable Income

By contributing to a pension, you can reduce your taxable income.

This can help you:

  • Stay below tax thresholds
  • Regain lost allowances, such as Child Benefit or the Personal Allowance.

✔ Tax-Free Growth

Your pension investments grow free from Income Tax and Capital Gains Tax, helping your retirement pot build up faster.

 

How Much Can You Put In?

For the 2025/26 tax year, you can contribute up to 100% of your relevant earnings, capped at £60,000.

If you don’t have earnings, you can still contribute £2,880 net (£3,600 gross) and receive basic rate tax relief.

 

How It Works for Different Taxpayers

Self-Employed or Sole Traders

If you’re self-employed, whether you’re running a café in Salisbury, providing local services in Southampton, or freelancing from home, you can claim tax relief on personal pension contributions up to the annual allowance.

Example:
Let’s say your taxable profits are £70,000. If you contribute £10,000 to a pension (£12,500 gross), your basic rate tax band is extended, so that £12,500 is taxed at 20% instead of 40%.

Company Directors and Employers

If you run a limited company, your business can contribute directly to your pension.

Benefits include:

  • Contributions are treated as a business expense, reducing Corporation Tax.
  • No National Insurance or dividend tax is due on employer pension contributions.

Example:
If your company pays £10,000 into your pension, you pay no NI or dividend tax on that sum, and your company profits (and tax bill) are reduced.

 

Using Pensions to Manage Tax Thresholds

Pension contributions can help you stay below income thresholds, such as:

£60,000 The High-Income Child Benefit Charge
£100,000 The loss of your Personal Allowance
£125,140 The 45% additional tax rate

 

By planning your pension contributions carefully, you can keep more of your income.

 

Key Changes for the 2025/26 Tax Year

  • Annual Allowance: Remains at £60,000
  • Low Earners: From April 2025, low earners in “net pay” pension schemes will receive a government top-up to level the playing field.
  • Furnished Holiday Lets: From April 2025, profits from furnished holiday lets will no longer count as relevant earnings for pension tax relief.
  • Higher Rate Relief: If you’re a higher or additional rate taxpayer, remember to claim extra relief through your Self-Assessment.

 

Don’t Leave It Too Late

The timing of pension contributions is significant to be able to claim relief for that year.
The earlier you plan, the more flexibility you’ll have, whether you’re based in Salisbury, Southampton, or further afield.

 

How Numeric Accounting Can Help

At Numeric Accounting, we help business owners, directors, and individuals across Hampshire make smart financial decisions.

We’ll work closely with your financial adviser or pension provider to ensure your pension contributions are:

  • Planned correctly
  • Documented properly
  • Claimed in the most tax-efficient way

Our goal is to help you build a secure future while minimising your tax today.

See how we can help you.

If you’d like to explore how pension contributions could reduce your tax bill, or you want to make sure you’re making the most of your allowances, contact the Numeric Accounting team today.

We’re here to help, whether you’re in Salisbury, Southampton, or the surrounding areas.

 

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