HANDS OFF OUR CASH!

The tax burden is set to increase this year, so it pays to pull out the stops to limit your exposure, writes Personal Finance Editor HARVEY JONES. Here are some easy steps you can take to protect more of your hard-earned money from the taxman

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thresholds, rising pension incomes and changing rules, the price of getting it wrong is climbing fast.

PENSIONS

THE state pension is the bedrock of most people’s retirement income, and the good news is that it will rise in line with the triple lock next April at 4.8%. That will lift the full new state pension to almost £12,548, which is only £42 below the frozen £12,570 personal allowance.

Any retiree with even the tiniest sliver of extra income will start paying tax on it.

From April 2027, everyone receiving the full new state pension will exceed the personal allowance entirely.

Chancellor Rachel Reeves has suggested pensioners won’t have to pay income tax if they have no other sources of income, but the devil is in the detail and we don’t know it yet. One thing is clear, though.

More than nine million pensioners already pay income tax in retirement, and that number is only heading higher. So minimise what you are charged wherever possible.

The 25% tax-free cash lump sum benefit survived the Budget, despite feverish speculation that it was doomed.

Any withdrawals above that count as income and may trigger an income tax bill, so you need to plan carefully.

Spreading them over several years rather than taking one huge lump sum can save serious money, especially if it prevents you tipping into a higher tax bracket.

Think twice before raiding your pot too soon. You can start withdrawals from age 55, rising to 57 from 2028, but drawing a pension while still working can result in a painful tax hit.

Draining too much too early also risks leaving yourself short later in life.

Rachel Vahey, head of public policy at AJ Bell, warns savers to be cautious with their tax-free cash. “You will be removing it from an environment where it can grow tax free, so think long and hard about what you want to do with the money.”