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Tax saving tips - pensions
by Coulson Pritchard at 11:13 06/03/03 (Conference Papers)
Gordon Brown's tax-take is increasing every year and it's now more important than ever that you make full use of the few personal allowances that remain.
You have up to the end of March to invest in your pension to slash your corporate and personal tax bill. With current low equity prices, this year could also be the best time in a generation to invest.

Investing towards your pension represents the most tax efficient method of transferring funds from your contract into personal hands. Most freelancers will be able to invest up to 300pm, irrespective of the salary drawn. Above this level age-related allowances come into play, based on a percentage of annual salary (plus any benefits in kind).

This 3600pa threshold, before salary becomes an issue, represents an unexpectedly generous change to pension rules. It is a great opportunity for freelancers to invest, not only on their own behalf but also for a spouse and even for children, all without the need to draw high taxable salaries.

The ability to soak up unused pension allowances from previous years has now been abolished but in its place freelancers have the right to nominate a single 'base year' to which current year's pension allowances can be applied.

By using the highest salary that you have drawn over the past five it is possible to maintain a tax-efficiently low salary now but base this year's contributions on a higher, previous years, PAYE (perhaps relating to a time you may have been a permanent employee).

Using these little known pension rules, among others, you can dramatically reduce the tax-man's deductions from your earnings. More information and to apply online is in the pensions section of the Financial Services available to freelancers through Shout99's Freelancer Services.
Coulson Pritchard

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