Pensions offer some of the most generous tax relief available in the UK, yet most people use only a fraction of what is available to them. We help individuals, company directors and business owners across Surrey make the most of their pension allowances, plan their retirement income tax-efficiently and ensure their pension fits coherently into their wider financial and estate plan.
The tax relief available on pension contributions is genuinely extraordinary. A higher rate taxpayer who contributes £10,000 to their pension receives £4,000 back from HMRC, making the actual cost just £6,000 for a £10,000 investment that then grows in a tax-free environment. For additional rate taxpayers and those with income in the £100,000 to £125,140 band where the personal allowance tapers, the effective relief can be even higher.
Yet most people contribute only what their employer automatically puts in, never review whether they are using their carry forward allowance, and have no idea whether their pension is coordinated with the rest of their financial picture. For business owners and company directors across Surrey, this gap is often even more significant because the opportunity to make employer pension contributions through the company, reducing both corporation tax and personal tax simultaneously, is one of the most efficient forms of profit extraction available.
We provide pension tax planning as part of our joined-up personal tax and business advisory service. We are not financial advisers and do not select specific funds or products. What we do is ensure that the tax structure around your pension is optimised, that you are contributing efficiently, and that your pension planning works coherently alongside your income tax, capital gains tax and inheritance tax position.
The pension rules have changed significantly in recent years. The lifetime allowance has gone, new lump sum limits apply and important changes to pension and inheritance tax are proposed for 2027.
Our pension planning work is focused on the tax side of retirement, making sure your contributions, allowances, drawdown strategy and estate planning all work together efficiently.
Each year we calculate your available annual allowance, check whether carry forward from previous years is available and recommend the optimal contribution level for your circumstances. We ensure that contributions are structured correctly between personal and employer contributions to maximise the tax relief available and avoid any annual allowance charge.
Core serviceIf your income is approaching or above £200,000, the tapered annual allowance is a genuine risk to your pension planning. We calculate your threshold income and adjusted income precisely, assess the extent to which your allowance is tapered and advise on whether personal pension contributions or salary adjustments can reduce your adjusted income below the taper threshold and restore the full £60,000 allowance.
For company directors in Surrey, employer pension contributions paid directly from the company are one of the most tax-efficient ways to extract profits. They are an allowable business expense that reduces corporation tax, are not subject to income tax or National Insurance and can be made on top of salary and dividends. We advise on the optimal contribution level, timing within the company's accounting year and how to structure contributions to maximise relief.
DirectorsIf you have not fully used your annual allowance in the previous three tax years, carry forward allows you to make much larger contributions in the current year and still receive tax relief. This is particularly valuable after a business sale, a large bonus, the receipt of an inheritance or simply a period when other priorities took precedence over pension saving. We calculate your exact carry forward entitlement and integrate it into your year-end tax planning.
Under salary sacrifice, you agree to reduce your gross salary and your employer pays the equivalent amount directly into your pension. You save income tax at your marginal rate and employee National Insurance on the sacrificed amount. Your employer also saves employer National Insurance at 15% and may pass some or all of that saving into your pension as an additional contribution. We advise on setting up efficient salary sacrifice arrangements for employed directors and employees.
How you take income from your pension in retirement is as important as how you save for it. We advise on the sequencing of withdrawals across different income sources, including pension drawdown, dividends from a company, rental income, savings interest and the State Pension, to minimise your overall tax burden in retirement. We model the tax impact of different drawdown strategies across multiple tax years so you can make an informed decision.
Currently, unused pension funds fall outside the estate for inheritance tax purposes, making them a powerful legacy planning tool. From April 2027, the government proposes to change this. We review how your pension fits into your broader estate plan, advise on whether drawdown strategy should be adjusted to reduce the future IHT impact and ensure your nominated beneficiary arrangements reflect your current wishes.
IHT planningIf you are a higher or additional rate taxpayer making personal pension contributions into a relief-at-source scheme, the pension provider automatically claims 20% basic rate relief on your behalf. However, the additional 20% or 25% relief at the higher and additional rates must be claimed through your self assessment tax return. We ensure this relief is correctly claimed every year so you are never leaving free money with HMRC.
The full new State Pension in 2025/26 is £11,502 per year, just below the personal allowance. We review your National Insurance record as part of the wider retirement planning picture, check whether gaps exist that could be worth filling with voluntary contributions and ensure the State Pension is factored correctly into your retirement income tax projections alongside your private pension drawdown.
Surrey has a large and diverse population of limited company directors running businesses from sole practitioners and consultancies to property management companies and growing technology businesses. Most take a combination of salary and dividends, which is broadly tax-efficient up to a point.
But when it comes to extracting larger amounts of profit beyond the optimal salary and dividend combination, employer pension contributions are almost always a more efficient route than taking additional dividends. The comparison becomes even more stark for directors paying 40% income tax on dividends or those approaching the £100,000 threshold where the personal allowance starts to taper.
We model the comparison for each director individually, taking into account their current salary, dividend level, pension pot size, available annual allowance and personal tax position, before recommending the optimal approach for their specific circumstances.
Our pension planning work is integrated with your self assessment return and your company accounts so the advice is always grounded in your actual numbers.
We review your income from all sources, calculate your available annual allowance including any carry forward, and identify whether the tapered allowance applies to your situation.
We recommend the optimal contribution level, structure between personal and employer contributions, and timing within the tax year or accounting period to maximise the available relief.
We ensure higher and additional rate relief is correctly claimed through your self assessment return, and that employer contributions are reflected accurately in the company accounts and tax computation.
We review your pension position each year as part of your tax return process, updating the carry forward calculation, checking for rule changes and ensuring your strategy remains appropriate as your income evolves.
We work with individuals across Surrey whose pension planning needs range from maximising annual contributions as a director to planning a tax-efficient drawdown strategy in retirement.
For directors of Surrey limited companies, employer pension contributions are often the most tax-efficient way to extract profits beyond the optimal salary and dividend combination. We model the numbers and recommend the right level each year within the annual allowance.
Surrey's concentration of finance, law, technology and corporate professionals means many residents face the tapered annual allowance or the personal allowance trap. We calculate exact positions and advise on pension contributions to manage both issues efficiently.
Self-employed individuals often neglect pension planning because there is no automatic employer contribution. We advise on the optimal contribution level for sole traders and freelancers in Surrey, ensuring personal contributions are claimed correctly on the self assessment return.
The years immediately before retirement offer important planning opportunities, including using carry forward to make final large contributions and planning the order in which different income sources are drawn down to minimise tax across the retirement period.
Drawdown planning does not stop at retirement. Coordinating pension withdrawals with other income sources, making the most of the personal allowance and managing the tax on each year's income efficiently can significantly reduce the overall tax paid across retirement.
Landlords across Surrey often face complex income tax positions combining employment or self-employment income with rental income. Pension contributions can reduce adjusted net income, restore the personal allowance and reduce the overall tax burden significantly in the right circumstances.
The standard annual allowance for 2025/26 is £60,000. This covers all contributions made by you, your employer and anyone else into all your pension schemes combined, plus any tax relief added by HMRC. You can only receive tax relief on personal contributions up to 100% of your UK earnings, so if you earn £40,000, the most you can contribute personally is £40,000. Your employer can contribute up to the remaining £20,000 within the same £60,000 cap. If you have unused allowance from the previous three tax years, you may be able to carry it forward and contribute above £60,000 in the current year, provided you are a pension member in each carry forward year.
The tapered annual allowance reduces the standard £60,000 annual allowance for people with high incomes. If your threshold income exceeds £200,000 and your adjusted income exceeds £260,000, your allowance reduces by £1 for every £2 of adjusted income above £260,000, to a minimum of £10,000 at £360,000 adjusted income or above. Surrey has a high concentration of senior professionals in finance, law, technology and corporate roles who are affected. We calculate your exact position each year and advise on whether making pension contributions can reduce your adjusted income and avoid or reduce the taper, which can be worth a significant amount in tax relief.
The pension lifetime allowance was fully abolished from 6 April 2024. There is no longer a cap on the total amount held in registered pension schemes. However, two new allowances now apply: the Lump Sum Allowance of £268,275 caps the total tax-free cash you can take from all your pensions during your lifetime, and the Lump Sum and Death Benefit Allowance of £1,073,100 caps the tax-free lump sums payable from your pension on death before age 75. Withdrawals above these caps are taxed as income at your marginal rate. Previous holders of lifetime allowance protection may retain enhanced allowances under transitional rules and should review their position with a qualified adviser.
When you access your pension from age 55 (rising to 57 in April 2028), you can take up to 25% as a tax-free lump sum, subject to the Lump Sum Allowance of £268,275. The remaining 75% is taxed as income at your marginal rate when withdrawn. Large withdrawals in a single year can push you into a higher tax band unnecessarily. Spreading pension withdrawals across multiple tax years, coordinating drawdown with other income such as dividends, rental income or savings interest, and using the personal allowance of £12,570 efficiently can reduce the total tax paid across your retirement significantly. The State Pension counts as taxable income and adds to your other income when calculating the rate that applies.
For most company directors in Surrey, employer pension contributions are significantly more tax-efficient than additional dividends for extracting profits beyond the optimal salary and dividend level. Employer contributions are an allowable business expense that reduces corporation tax at up to 25%, and they are not subject to income tax or National Insurance for the director. Dividends are paid from post-corporation-tax profit and are then taxed again at 8.75%, 33.75% or 39.35% in the director's hands. For directors earning in the higher rate band, the combined saving from choosing pension over dividends can be substantial. The right balance depends on individual circumstances including age, pension pot size and when you want to access the funds.
The government has proposed that from April 2027, unused defined contribution pension pots will be included in estates for inheritance tax purposes. Currently pension funds fall entirely outside the estate, making them an exceptionally tax-efficient way to pass wealth to the next generation. If the change proceeds as proposed, unused pension funds on death could face both income tax and inheritance tax. This is a significant change for many Surrey families who have accumulated large pension pots. We advise clients to review their pension drawdown strategy and broader estate plan before April 2027 to ensure they are as well positioned as possible under both the current regime and the proposed new rules.
Carry forward allows you to contribute more than the current year's annual allowance by using unused allowance from the previous three tax years. To use carry forward, you must have been a member of a registered pension scheme in each of the carry forward years, and you must fully use the current year's annual allowance first. Your total personal contributions cannot exceed 100% of your current year UK earnings. Carry forward is particularly valuable after a business sale, a large bonus, receipt of an inheritance or a period of lower contributions. Company directors can also use it to make large employer contributions that claim significant corporation tax relief, provided the wholly and exclusively rule is satisfied.
Get in touch for a no-obligation pension review. We serve clients across Surrey and West London from our Kingston upon Thames office, and remotely for those who prefer a fully digital relationship. Fixed fees, every allowance checked, every year.