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Beg, borrow or steal to use full pensions allowance

The Adam Smith Institute calculates that on Tax Freedom Day the average Briton will have earned enough money to cover all the income tax, National Insurance, VAT, fuel duty and other taxes that they owe in 2015.

But wouldn't it have been nicer to have spent May, and even April, working for yourself, too? There are simple steps to bring forward your own Tax Freedom Day, including moving your investments into individual savings accounts to take advantage of the increased annual allowance of £15,240. According to figures from, £104m in stocks and shares investments is not held in Isas.

Most urgently, higher earners need to squirrel away as much as possible into their pension before the post-election additional Budget, scheduled for 8 July. UK employees on average put away £3,490 annually into their pension, which includes £698 a year in income tax relief from the government – a key element of a tax freedom plan.

This bonus Budget, the first of the new parliament, is likely to be used to deliver bad news, as it will allow the longest time for the electorate to forgive the government before the next general election.

As confirmed in the Queen’s speech last week, the Conservatives plan to deliver on their manifesto pledge to reduce tax reliefs for those making pension contributions in order to pay for increased free childcare. The pledge is expected to cost around £350m a year, though it is not yet clear exactly how the pensions axe will fall to pay for this policy.

Under known Tory plans, those earning more than £150,000 who are subject to the marginal rate of 45 per cent would see the tax relief available on their pension contributions fall by as much as £13,500 a year. Someone earning £250,000, contributing the maximum £40,000 a year to their pension, would receive £4,500 in tax relief, compared with £18,000 currently.

Tom McPhail, head of pensions research at Hargreaves Lansdown, says: "Past experience points of the possibility of the door being slammed shut on budget day. It is quite possible that 40 per cent tax payers could also see their tax relief changed as part of a wider restructuring."

Mr Green says: "It might be worth considering making a larger one-off contribution before the summer budget, in order to benefit from the higher tax relief."

You might be able to put away more than this year's £40,000 limit. Adrian Walker, retirement planning manager at Old Mutual Wealth, says: "Carry forward rules mean that any unused annual contribution allowance from the past three years can be used, meaning an individual could actually make up to £120,000 in contributions."

The Conservatives have not confirmed if they plan to target the carry forward rules.

Philip Milton, chartered financial planner at Philip J Milton and Company, says: "On pensions, if you are over or near 55, if you have assets which could be converted into a pension fund upon which you can access the whole lot 'immediately', dare I be so rude as to say 'you are a fool' if you are not right up to your absolute limit? Beg, borrow or steal to use your full allowance before it is too late."