Pension savers urged to take action ahead of vital January tax deadline | Personal Finance | Finance

Pension saving, for the most part, can be a straightforward endeavour as people plan for retirement. However, there are certain rules to bear in mind, especially when it comes to tax. One such rule is particularly important given the impending Self Assessment tax deadline on January 31. Individuals who are actively saving into their pension will need to make a note of their annual allowance.

This is because the Government limits the amount of pension contributions a person will be able to make, and still earn tax on.

The annual allowance for pension contributions is 100 percent of a person’s income, or £40,000 – whichever is the lowest.

Any contributions over the limit are subject to income tax at the highest rate of pay.

If pension contributions exceed the annual allowance, a person will need to declare this to HMRC.

READ MORE: State pension alert as you could be entitled to back payment of £8,900

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We know some customers may struggle to meet the Self Assessment deadline on January 31.

“This is why we have waived penalties for one month, giving them extra time to meet their obligations.

“And if anyone is worried about paying their tax bill, they can set up a monthly payment plan online – search ‘pay my Self Assessment’ on GOV.UK.”