A financial expert is urging dentists to ‘use all available tax breaks to maximise their income and wealth’ with tax set to increase next year.
Nigel Callaghan, pensions analyst with Hargreaves Lansdown, suggests that one concession ‘much underused’ is that aimed specifically at those aged 65 and over which allows the first £9,490 of income each year to be completely tax free.
He suggests that this is particularly useful for couples where one has a limited working history and will subsequently receive a low retirement income.
Nigel explains: ‘There are a number of ways to increase that partner’s future income, of which a popular one is to invest £3,600 into a pension every year, irrespective of whether they are now earning any money.
‘For every £80 invested, the government will automatically add another £20.’
When these savings are converted into an annuity income, a quarter will be paid out immediately as a tax-free lump sum and the first £9,490 of income will pay no tax at all.
The amount of annuity income that will be paid depends on the investor’s age but can be as high as 11.45% per annum.
Nigel concludes: ‘This will continue for the rest of the investor’s life, no matter how long that is. With tax increases almost certain next year, it would be a shame to pay tax needlessly.’
For more information on Hargreaves Lansdown, visit www.H-L.co.uk