The Daily Telegraph - Saturday - Money

Scottish savers can benefit from pension loophole

- Sam Brodbeck

Scottish workers have been given an opportunit­y to add thousands of pounds to their savings as a result of a quirk created by new tax rates north of the border.

Someone who earns £50,000 could see their pension boosted by an additional £8,500 over their career if they take advantage of the loophole.

From April, the Scottish income tax system will differ for the first time from the rates and bands used in the rest of Britain.

Two new bands have been created – a starter and intermedia­te rate of 19pc and 21pc respective­ly – while the existing higher and top rates will increase by 1p in the pound each. The basic rate remains unchanged at 20pc.

The Government offers tax relief on pension contributi­ons. Pension savers are given a top-up based on their marginal rate of income tax, meaning that higher earners get a bigger boost per pound saved.

Now that some people will pay tax at 41pc and 46pc they will be able to claim an additional 1 percentage point of tax relief on all their pension savings.

For someone who earns £50,000 and saves 10pc of their salary into a pension, the benefit will be £50 a year. Over a typical 40-year career, with reasonable investment returns and salary growth, the additional tax relief would be worth £8,456, according to AJ Bell, the broker.

The extra 1 percentage point tax relief can also be claimed by intermedia­te-band payers and additional-rate payers. People on the starting or basic rate are unaffected.

 ??  ?? Scotland’s income tax system is changing
Scotland’s income tax system is changing

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