The government encourages everyone to save for his or her retirement by providing tax relief on pension contributions. A tax relief either reduces your tax bill or increases your pension fund. There are plenty of tax and financial vehicles made in the United States where you can invest your pension. Some are tax deductible, like the traditional IRA and some not, like the Roth IRA. The traditional IRA is made with after-tax money and you can claim on your tax return, therefore reducing your adjusted gross income.

The process to get tax relief on pension contributions will depend on whether you are paying into a public service, occupational or personal pension scheme. Typically, your employer gets the pension contributions from your pay before tax is deducted. You only have to pay tax on the amount left, thus whether you pay tax at a basic, higher or additional rate, you will be able to get the full relief immediately. If you are a dentist of a General

Practitioner and contribute to a public service arrangement, you will be taxed as self-employed for a portion of your earnings so you should claim tax relief through the self-assessment tax return. Furthermore, you can put money in someone else’s personal pension, your husband, wife, child or grandchild for instance. They will be able to get tax relief but will not affect your own tax dues. Read the rest of this entry »

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