The Brexit and tax year end clocks are counting down towards the end of the month, so if you have any last-minute tax planning, now’s a good time to get on with it.
Britain is set to leave the European Union on March 29, while the tax year ends at midnight on April 5.
Even though the deadline is fast approaching, no one is sure what will happen on Brexit day – which now looks like being stretched to some time near the end of June.
If you have spare cash to tuck away in an ISA or pension to max out this year’s tax allowances, then don’t hang around.
Tidying up the tax year depends on how much money you can save.
Topping up a pension
If you have enough cash to use your pension annual allowance of £40,000 and the £20,000 ISA allowance, then hurry up.
If you don’t save every penny of your allowances each year, then there’s not so much urgency as you can pay in any time confident you have the headroom for tax relief.
For earners on the cusp of the higher rate tax threshold, paying some money into a pension makes sense as it can keep you in the basic rate tax bracket.
Pension contributions receive marginal rate tax relief – that’s the highest rate of tax you pay.
Basic rate taxpayers receive relief at 20% , the maths mean for every 80p paid into a pension, the government adds 20p tax relief. To save £1,000, you must contribute £800.
The figures are even better for higher rate taxpayers with 40% relief.
QROPS and Brexit
For every 60p they pay into a pension, the government contributes 40p, so they only need to save £600 to see £1,000 go in to their retirement savings.
To save the maximum £40,000 a year, basic rate taxpayer need to contribute £32,000 and basic rate taxpayers £24,000.
For expats with QROPS offshore pensions, the outlook is still uncertain. What is QROPS article will explain in more details about
QROPS outside the EU should see no changes, but as special rules apply to those within the EU, Brexit could have an impact.
Currently, the rules allow you to move your pension to a QROPS if you live in the European Economic Area (EEA) and your QROPS is based in another EEA state. How Brexit may impact this remains unknown.