A missed allowance is like a lost opportunity to plant a seed

Think of your tax allowances as seeds for financial growth. Each allowance you use is like planting a seed that can grow into a strong, healthy tree, providing shade and fruit for years to come. But every allowance you let pass by is a seed left unplanted, a missed opportunity to create something lasting.

“The best time to plant a tree was 20 years ago. The second-best time is now.” – Chinese Proverb

With 90 days left in the tax year, now is your time to plant the seeds of financial growth that will benefit you and your family for years to come.

Carry forward on pensions: A good tip from Lewis

The annual allowance is the most that can be paid in to all your pension arrangements in a single tax year. For 2024/25 it is 100% of earned income up to a limit of £60,000. However, there are methods a financial adviser can use to increase this which Lewis explains below. The annual allowance may be lower if you have already accessed your pension pots, or you have a high income.

Contributing into a family pension scheme is another option. Before you read on, we always talk to our clients about the concept of putting your oxygen mask on first – just like when you are going on holiday. Ensure that your financial plans are in a good position before you start planning for anyone else. So back to the kids, any UK resident can contribute up to £2,880 (net) into a pension, irrespective of their earnings, and obtain 20 per cent tax relief. This means the pension is credited with an extra £720 so that the gross contribution amounts to £3,600. You could consider contributing to a pension for a non-working spouse/civil partner or children to benefit from this.

A good tip from Lewis Baxter, Chartered Financial Planner in our London financial adviser office:

“Many people are unaware that pension rules allow you to carry forward unused allowances from the past three years. This presents an excellent opportunity for individuals and business owners to save in a highly tax-efficient way. For example, if you haven’t used your £60,000 annual allowance in the past three years, you could carry forward up to £180,000, resulting in significant tax relief depending on your income and tax bracket.”

“This strategy is especially valuable for higher-rate taxpayers, as it could reduce your taxable income, potentially bringing you into a lower tax band while also growing your retirement savings.”

“It’s important to note that eligibility for carrying forward allowances requires you to have been a member of a UK-registered pension scheme during the years you wish to carry forward, and your income must support the contributions. While these funds are locked away until retirement, this can be a positive, as they remain invested for the long term, free from the temptation of early withdrawals, allowing their growth potential to compound significantly.”

“However, it’s crucial to ensure this strategy aligns with your life goals. Make sure you don’t need these funds for medium-term priorities and that you’ve set aside enough for emergencies or unexpected events.”

Navigating pension allowances can be complex, but with the right guidance, you can make the most of this opportunity. Speak to your financial adviser to determine how carrying forward unused allowances could enhance your tax efficiency and support your unique financial situation. If you are yet to work with a financial adviser you are welcome to find out more about Unividual as and when you are ready.

For more pension planning tips why not check out our Ultimate Guide to Retirement Planning

Guide to retirement

Every day counts - don’t wait until March!

Many people wait until the last minute to act, often finding themselves rushed or missing deadlines. By starting now, you give yourself time to make informed decisions and avoid unnecessary stress.

At Unividual, we specialise in helping clients turn tax allowances into financial advantages. Our expert advisers can review your situation and provide tailored solutions to ensure you don’t leave money on the table. So if you are reading this and you aren’t already a client of ours, here are a few next steps you could take:

1. Check your allowances: Do you still have room in your ISA or pension?
2. Speak to an expert: Our team will create a personalised plan for you.
3. Act now: The clock is ticking, contact Unividual today to make the most of the 2024/25 tax year.

Every pound you save today could mean more security, freedom, and opportunity tomorrow. Don’t let another tax year slip by without taking full advantage. Whether you’re looking to grow your investments, secure your family’s future, or simply feel more confident about your finances, Unividual is here to help.

Author: Cherie-Anne Baxter-Blyth

Date: 13th December 2024

Updated: 13th December 2024

Approver: Quilter Financial Limited Awaiting

Risk Warnings:

The content and details of this article are as accurate as the day it was written or updated.

The value of investments and the income they produce can fall as well as rise, you may get back less than you invested.

Inheritance Tax Planning & Tax Planning are not regulated by the Financial Conduct Authority.

Tax treatment varies according to individual circumstance and is subject to change.

For ISA’s Investors do not pay any personal tax on income or gains but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA manager . Tax treatment varies according to individual circumstances and is subject to change.