Tax hike to 'drive pension contributions'

Date: 31st May 2011

Pension contributions could be set to soar in the UK as the number of people falling into the higher tax bracket increases.

HM Revenue & Customs recently published a forecast showing that a 20 per cent rise in the number of higher rate tax payers is expected this year.

AJ Bell, a provider of self-investment pension plans, has claimed that this rise will lead to a "sharp increase" in pension contributions.

It could also lead a number of individuals to seek the assistance of a specialist tax accountancy service in order to ensure their finances are as tax-efficient as possible.

According to government figures, the number of people paying the higher rate will rise from 3.1 million to 3.7 million, while the number paying the "additional tax" rate of 50 per cent will go from 246,000 to 275,000.

Billy Mackay, A J Bell's marketing director, said: "Advisers and clients will recognise that one of the best ways to obtain relief against the higher and additional rates of tax is through pension contributions. We've already seen a 170 per cent increase in single contributions into our Sippdeal and Sippcentre accounts in the first month of the financial year compared with the same period last year.

"With the number of higher and additional rate taxpayers on the increase it is no surprise that many are planning their pension contributions carefully to reduce the tax that they pay."
Posted by Jacob Williams