Ben Wilkinson Personal Account

Make the most of this unbelievably generous tax giveaway – while you still can

There aren’t many reasons for higher and top- rate taxpayers to be cheerful in Britain today. Millions more of us are paying income tax at 40p or 45p in the pound. Allowances on dividends, capital gains, savings and inheritance have also been slashed or frozen in time.

There is one perk, however, that has survived the Conservative tax creep unscathed – so far that is.

Tax relief granted to money put straight into a pension is still levied at the rate you pay income tax. It means every £ 1 that an additional- rate taxpayer puts into their pension only costs them 55p, and for higher-rate payers every £1 saved effectively costs 60p.

It’s an instant return of perhaps more than 80pc. And when you add in (hopefully) healthy investment growth over your career, it is the most profitable and efficient way of saving around. While far better understood, Isas are far less generous ( but more readily accessible).

Pension tax relief is also a fantastic device to guard yourself against the stealth tax raid imposed by this Government. By increasing your pension contributions you can offset the effect of being dragged into a higher tax bracket.

The only catch is that you may have to wait decades until you can touch your pension and reap the rewards. Yes, you are taxed when you retire and draw on your pension, but usually at a lower rate you paid income tax over the course of your career. And of course you can take 25pc of your pot entirely tax free.

A £1m pension pot now generates an income of £50,000 a year – just shy of the 40p tax rate threshold.

Pension tax relief is a perk that has grown even more generous under the Tories. Thanks to well-paid NHS doctors threatening to retire early to avoid tax bills, the annual tax- free pension saving allowance has been increased from £40,000 to £60,000. The lifetime allowance has also been stripped away meaning you can build a pot in excess of £1m without losing the benefit of pension tax relief. But this glaringly generous tax break on pensions for the country’s highest earners seems too good to be true, and I can’t imagine egraph Money’s