Increase Pension Income by Paying Less Tax!

It is sometimes said that “tax is a levy on the ill-informed”. In my experience I have certainly found this to be true of most people I had dealings with, due mainly to a lack of understanding of the tax system, which is quite understandable but also to a kind of apathy.

Most people have a tendency to put off what they dislike or are uninterested in, such as tax returns. Unfortunately this can quite often lead to them paying tax unnecessarily, with the knock on effect of reducing income, possibly at a time when it is most needed.

In retirement it is essential that you maximise every available pound to ensure that you have as much net income as possible to spend. Tax savings can, and should, form a major part of your retirement planning strategy.

Throughout my career I was able to help a great many clients obtain tax rebates and pay less tax, by just simply being aware of how the system works and what benefits were available.

An example of this applies to retired self-employed individuals who are receiving fairly modest levels of income via a state pension and personal pension or retirement annuity.

In this situation the state pension is being paid gross (no income tax is deducted), but the personal pension or retirement annuity has tax deducted at the basic rate by the pension company as directed by the revenue.

In some instances it may be that after taking into account the individuals personal allowances (amount of income that can be earned before tax), they have in fact paid more tax than should have been paid via their pension plan.

By making a claim to the revenue to re-assess the situation, it may be possible to claim this overpaid tax back and to revise the future tax collected. If an initial claim is accepted by the revenue it may then be possible to carry out this exercise for the previous 6 years.

In some instances I was able to reclaim from the revenue on behalf of client’s hundreds and even thousands of pounds in overpaid tax, certainly worth the effort.

If you think you are paying to much tax it is your responsibility to inform the revenue and provide the necessary information in support of a claim. Don’t think that the revenue will tell you, it just won’t happen.


Please join me in my next post for more ideas on maximising income in retirement.