Pension tax benefits?

I have heard that I can reduce my tax bill by making contributions to a pension fund but am unsure how this works. If I were paying tax at 40% rate and I decide to contribute 拢1000 to my pension will my tax bill be reduced by 40% of 拢1000 = 拢400?

Also would this also give me a reduction in my national insurance bill of 11% of 拢1000 = 拢110?

A pension contribution of 拢1000 would only cost you 拢600. You pay 拢780 straight away then claim back the further 拢180 through your tax return.

More than likely, when you retire, your pension allow you 25% of the fund as a tax free lump sum and the rest is only taxed at basic rate of 22%.

Rather than saving you tax, the pension excercise delays the tax you pay until you retire at hopefully a lower tax rate.

No. If you payed 拢1000 into personal pension and you were a higher rate tax payer. The government would top up your pension with the 40%. Meaning your total contributions would be 拢1400. The tax you pay either through PAYE or through filling out tax returns would remain the same.

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