With the end of the 2020/21 tax year fast approaching, it is now the time to consider some opportunities for saving tax with some careful end of year tax planning. This guide will provide tax saving tips, but not all of these will be relevant to your particular circumstances. As always we are here to discuss anything that may be of interest to you.
Please take a few moments to consider the following tips that may help you to SAVE TAX in this current year and in future tax years.
This guide has been prepared using current legislation, rates and allowances that are correct at the time of writing. As you may be aware, the Chancellor is due to deliver the Budget on 3 March 2021 and there is plenty of speculation surrounding potential tax hikes that may be announced, particularly with regards to Capital Gains Tax. Please look out for our Budget Summary which we will make available shortly after the Budget, and keep up to date with any tax changes that are announced in the Budget, as this may change your tax planning before 6 April 2021. You may wish to consider taking action before the Budget if you are concerned that a relief may be reduced or removed on Budget Day. We will, of course, be happy to discuss any tax matter with you beforehand.
The tax saving tips have been grouped into the following headings. Please click on each of the headings below for more information:
SOLE TRADER AND PARTNERSHIP BUSINESSES
Business tax planning is usually best done before the end of the accounting period. Many sole traders and partnerships have an accounting year end which coincides with the end of the tax year (31 March or 5 April). If you are approaching your year end, you may wish to consider the following items which may help to reduce any tax liability for 2020/21. Even if you don’t have a 31 March or 5 April year end, you may still to consider these items for your business as you approach your year end.
If you are considering significant capital or revenue expenditure in the near future, you may wish to consider bringing forward this expenditure and claiming tax relief in the accounts to 31 March 2021 (or your year end if different) to benefit from reduced tax liabilities a year earlier.
Certain types of capital expenditure can qualify for tax relief.
The Annual Investment Allowance (AIA) was temporarily increased from £200,000 to £1,000,000 on 1 January 2019 and will remain at this level until 1 January 2022. Transitional rules will apply for financial years that span 1 January 2022. This limit will apply for partnerships and sole traders. Expenditure on qualifying expenditure, for example plant and machinery, up to the Annual Investment Allowance will qualify for 100% relief.
Certain energy-saving environmentally beneficial plant and machinery or water-efficient equipment and installations may attract immediate tax relief at 100%.
Currently, there are separate rules for capital allowances on motor cars with tax relief being given at 100%, 18% or 6% depending upon the type of vehicle purchased.
- A first year allowance of 100% is available for new electric cars or new cars with CO2 emissions of 50g/km or less.
- A writing down allowance of 18% is available for cars with CO2 emissions between 51g/km and 110g/km.
- A writing down allowance of 6% is available for cars with CO2 emissions which are above 110g/km.
The 100% first year allowance on new and unused cars emitting no more than 50g/km of CO2 comes to an end on 31 March 2021. From that date onwards the 100% first year allowance will only be available on new and unused cars with zero emissions (electric cars). Cars with CO2 emissions of 50g/km or less would include hybrid vehicles and electric vehicles. If you are thinking about buying a new and unused hybrid car in your business then you should ensure that you do so before 31 March 2021 if you want to take advantage of this valuable tax relief.
Where a car does not qualify for the 100% first year allowance, a writing down allowance will be available instead. Currently, this will be at the main rate of 18% for new and unused cars emitting between 50g/km and 110g/km of CO2. This main rate also applies to second-hand cars emitting up to 110g/km, including electric cars. For new and second-hand cars that emit more than 110g/km of CO2, the writing down allowance is currently at the special rate of 6%. From 1 April 2021, new and second hand cars purchased that emit more than 50g/km will be added to the special rate pool.
As a reminder, ‘new and unused’ means ‘new and not second-hand’. HMRC will accept, however, that a vehicle is unused and not second-hand even if it has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser, or used as a demonstration car. An ex-demonstrator vehicle, therefore, should be accepted as new and unused for the purposes of capital allowances.
Investing in qualifying expenditure before 31 March 2021 could reduce your tax liabilities for 2020/21 by reducing your taxable profits for the year. We will be happy to discuss this with you further.
You may wish to consider revaluing stock to reduce this to its current realisable value if you are carrying stock on your balance sheet and the value of the stock is now less than its original cost. The effect of this is to reduce your trading profit or increase your losses for the year which, in turn, will also reduce your tax liabilities.
As a business owner, you could pay a non-earning spouse/partner or adult child a salary on which you will get tax relief and if paid at a certain level no income tax or National Insurance Contributions would be payable but credit would be given towards the State Pension. The business can also pay an employer’s pension contribution to your spouse/partner’s pension plan and this would also reduce your tax liability. The total package of salary, benefits and pension contributions must be justifiable when considering the actual work performed by your partner. Please contact us to discuss this further.
DIRECTORS AND EMPLOYEES
Tax savings tips for Directors and employees:
If you are a Director or a Shareholder of a close company and have received funds from the company in the form of a loan, the company will incur a 32.5% tax charge if the loan is not repaid within nine months of the end of the company’s accounting period. Therefore, repaying any loans within the nine month period will avoid the 32.5% tax charge.
Income over £150,000 is taxed at 45% (or 38.1% on dividends) and it may be possible to avoid paying this additional rate by delaying the payment of a bonus or dividend until after 5 April 2021 to avoid exceeding this threshold. Conversely, if your income is likely to exceed £150,000 in 2021/22 but is below this level in the current tax year, you may wish to consider bringing forward income to avoid the additional rate next year.
This strategy should also be used to keep your income below £100,000, as once your income reaches this level you will start to lose your personal allowance. Income falling between £100,000 and £125,000 has an effective tax rate of 60%. If delaying a bonus or dividend is not an option, then you could consider sacrificing salary to bring your income down below one of these thresholds in exchange for a tax-free employer’s pension contribution.
The Dividend Allowance charges the first £2,000 of dividends received at 0% regardless of your other income. It is important that you do not miss out on this allowance if you have not already received dividend income of at least £2,000. For total dividends above £2,000, the rates of tax are 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
When bringing forward a bonus or dividend you must also consider the impact that doing so would have on your personal allowance, tax credit and child benefit claims.
If your employer pays for the private fuel used in your company car you can avoid the fuel benefit charge for 2020/21 if you repay your employer in full for all of the private fuel before 6 July 2021. It may be a worthwhile exercise for you to calculate the amount that you will need to repay to your employer as you may find that the amount to repay is much less than the tax charge on the benefit in kind. The fuel benefit calculation has increased significantly over the last few years and will continue to increase next year.
Additionally, you may wish to consider changing your company car to an electric car or a car with lower carbon dioxide emissions to save tax, or giving up your company car altogether and using your own vehicle for business travel and claiming a tax free mileage allowance from your employer instead. The calculation of the car benefit changed from 6 April 2020 depending on whether the car was registered before or after 6 April 2020. Additionally, diesel cars attract a 4% supplement unless they are RDE2 compliant.
Pension contributions made on behalf of directors and employees are a tax efficient means of extracting profits from the company. Unlike personal pension contributions, employer contributions are not limited to 100% of earnings. It is important to consider the Annual Allowance and to calculate any carried-forward relief when deciding upon the level of pension contribution that your employer should make. Further information is included in the section “Personal pension contributions to reduce tax” in the Individuals section below.
Under the Tax-Free Childcare scheme eligible families get 20% of their annual childcare costs paid for by the Government. The way it works is that for every 80p you pay into a Childcare Account, the Government will contribute 20p. This could mean up to £2,000 per child (the scheme assumes a maximum of £10,000 per year childcare costs per child. If you pay more, you won’t get more help). Crucially, both parents need to be working in order to qualify.
If you currently receive Employer-Supported Childcare Vouchers then you can continue to do so, but you are not entitled to take part in the Tax-Free Childcare Scheme. Employer Supported Childcare, often referred to as childcare vouchers, closed to new applicants from 4 October 2018 and parents who wish to remain in Employer-Supported Childcare may continue to do so while their current employer continues to offer the voucher scheme, but you may wish to consider which of these two schemes is the most beneficial for you. The provision by employers of qualifying childcare vouchers is exempt from income tax and national insurance up to the following limits:
Where the employee joined the scheme before 6 April 2011:
£55 a week per employee
Where the employee joined the scheme on or after 6 April 2011:
£55 a week per week for a basic rate taxpayer
£28 a week per week for a higher rate taxpayer
£25 a week per week for an additional rate taxpayer
The Cycle to Work scheme is a UK Government tax exemption initiative introduced in the Finance Act 1999 to promote healthier journeys to work and to reduce environmental pollution. It allows employers to loan bicycles and cyclists’ safety equipment to employees as a tax-free benefit provided that at least 50% of the bicycle’s use is for business purposes (which includes home to work cycling).
Although it is not necessary, a salary sacrifice arrangement may be put in place, where the employee agrees to give up part of their pre-tax salary in exchange for the hire of a bicycle to be used as detailed above. Although the bicycle remains the property of the employer, the salary sacrifice arrangement can save both employers and employees National Insurance as well as employees PAYE.
If, after the salary sacrifice arrangement has finished, the employee wishes to purchase the bicycle from the employer, HMRC has a set range of percentages based on the age and original cost of the bicycle.
A booklet entitled Cycle to Work Scheme – Guidance for Employers may be obtained from Gov.UK by using the following link which will provide you with further information:-
https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance
If an employer and employee wish to take advantage of the cycle to work scheme via a salary sacrifice arrangement, we suggest that they use one of the many cycle to work scheme providers to ensure the correct paperwork including consumer hire arrangement is correctly recorded.
If an employer does not require a salary sacrifice arrangement to be put into place, they may simply purchase a bicycle for the employee to use.
From 6 April 2021 new tax rules will apply for individuals who provide their personal services to a medium or large business through an intermediary, usually the worker’s own personal service company, but could also be a partnership, a managed service company or an individual.
The rules (known as IR35) ensure that workers pay the same tax and National Insurance contributions as an employee where they would have been an employee if they provided their services directly to the customer. From 6 April 2021 all public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply. If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status.
Payments made for services provided from 6 April 2021 will be affected. For contracts deemed inside IR35, workers must have PAYE and National Insurance deducted at source. Please call us if you would like to discuss this further.
INDIVIDUALS
Please click on each of the following headings for more information:
If you are married or in a civil partnership and one spouse/partner has lower income, you could consider transferring income producing assets to the spouse/partner with the lower income for the following reasons:
- to utilise lower tax rates where one spouse/civil partner pays higher rate (40%/32.5%) or additional higher rate (45%/38.1%) tax
- to preserve the personal allowance where income for one spouse/civil partner exceeds £100,000
- if Child Benefit is claimed, to reduce the income of the higher earning spouse/partner to mitigate the High Income Child Benefit Charge.
Married couples and civil partners may transfer 10% of their unused basic personal allowance (currently £1,250) to their spouse or civil partner. Those receiving the marriage allowance must not be a higher rate tax payer and will benefit from a tax reduction of 20% of the transferred amount i.e. £250 (20% of £1,250). Claims may be made online and can be backdated to include any tax year since 6 April 2015 that you were eligible for Marriage Allowance.
If your investment income is at a level where you will lose your personal allowance, or pay tax at 45%, it may be worth considering investing in an insurance backed investment bond instead. This type of investment can be relatively secure and has the added tax advantage that 5% of the original capital investment can be withdrawn each year tax free. Withdrawals which exceed this amount are taxable however, as are the gains arising on surrender.
Income received from ISAs is tax free. There are strict limits as to how much you can invest into ISAs in a tax year. For 2020/21 the maximum allowance is £20,000. If you haven’t utilised the maximum amount allowable for 2020/21 now could be the time to make your investment so that you do not lose out. Your 2020/21 investment allowance must be used by 5 April 2021 or it will be lost.
As a reminder, your ISA investment for the year of up to £20,000 can be held in cash, or investments, or a mixture of the two.
Interest rates are currently at a very low level, so sheltering interest from tax may not seem to be all that beneficial currently. However, don’t forget that you are sheltering the interest from tax now and in future years and interest rates may increase at some stage. ISAs remain an excellent investment choice for higher and additional rate taxpayers.
Help to Buy ISAs, the government scheme designed to help you to save for a mortgage deposit to buy a home, closed to new applications on 30 November 2019. If you opened your Help to Buy ISA before this date you can keep saving into your account until 30 November 2029. There is no minimum monthly deposit and you can save up to £200 per month and the Government will add a 25% cash bonus on any savings that you make, up to a maximum bonus of £3,000, and this must be claimed by 1 December 2030.
You can use a Lifetime ISA to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. You can save up to £4,000 each year into your Lifetime ISA until the age of 50 and the Government will add a 25% bonus to your savings, up to £1,000 per year.
You can withdraw from a Lifetime ISA if you are buying your first home, if you are aged 60 or over, or in the event that you are ill with less than 12 months to live. If you make a withdrawal for any other reason (which is know as an unauthorised withdrawal) you will incur a withdrawal charge penalty. Usually, the withdrawal charge will be 25% of the amount withdrawn but this has been temporarily reduced to 20% until 5 April 2021 to help investors withdraw funds from their LISA during the coronavirus pandemic. The withdrawal charge will revert to 25% on 6 April 2021.
A withdrawal charge may arise if you intend to use a LISA to purchase your first home if you have at some time owned or inherited a property. If you think that this might apply to your situation, then we will be happy to discuss this with you.
Income Tax relief at 50% is obtainable when investing in qualifying SEIS start-up companies up to the annual limit of £100,000. These are considered to be high risk investments
Investing in EIS qualifying companies attracts income tax relief at 30% on a maximum annual investment of up to £1million (rising to £2million provided £1million of this is invested in knowledge-intensive companies) for qualifying individuals. Again these are considered to be high risk investments.
Should you be considering making either a SEIS or an EIS investment, then please contact us further to discuss this.
The tax relief on a personal pension contribution will be at least 20%, rising to 40% and 45% for higher rate and additional rate taxpayers and even 60% for those whose income exceeds £100,000 where the personal allowance is withdrawn.
For those with earnings over £50,000 who are either claiming Child Benefit or have a partner living with them who claims Child Benefit (whether married, in a civil partnership or cohabiting) up to 100% of the Child Benefit is reclaimed via the High Income Child Benefit Charge. Pension contributions are an effective way of mitigating this tax charge by reducing earnings for the purposes of this charge.
The annual limit for pension contributions on which tax relief may be obtained is £40,000. It is possible to carry forward unused annual allowances for a maximum of three years to offset against a contribution of more than £40,000. Therefore, any allowance unused for the year ending before 6 April 2018 will be lost after 5 April 2021. Don’t forget though that the limits on tax relief are linked to your earnings, with tax relief being restricted to the lower of 100% of your earnings or £40,000 plus any unused allowances brought forward. Limiting your contributions to amounts that qualify for at least 40% tax relief will give you the most benefit.
There will be a tapered reduction in your annual allowance from £40,000 to £4,000 if your income (including the value of any pension contributions) exceeds £240,000 and if your income (excluding the value of any pension contributions) exceeds £200,000. For these purposes, a minimum allowance of £4,000 will apply should your income be £312,000 or more.
If you have flexibly accessed your pension benefits, and withdrawn more than the 25% tax free cash, then you will have a reduced annual allowance of just £4,000. This is know as the Money Purchase Annual Allowance. There is no brought forward relief available.
Should your total pension contributions for the tax year exceed your annual allowance plus any available brought forward relief from earlier years you will incur an Annual Allowance Charge. If the charge is more than £2,000, and this has arisen because your pension contributions exceeded £40,000, you can ask your pension provider to pay HM Revenue & Customs for you out of your pension pot, but you must tell them to do so before 31 July in the year following the year in which the tax year to which the annual allowance charge relates ended. Put simply, for the 2020/21 charge, you have until 31 July 2022 to notify the scheme. If the charge has arisen because your pension contributions did not exceed £40,000 but, instead, exceeded the tapered annual allowance or the money purchase annual allowance you may still ask the pension scheme to pay the charge for you out of the pension pot, but they do not have to do this and the scheme may have it’s own deadline for you to request this (possibly as early as 31 July following the end of the tax year).
You could consider making a pension contribution for a non-earning spouse/civil partner or child before the end of the tax year. The maximum net payment that may be made will be £2,880 and HM Revenue & Customs will increase this to £3,600.
Finally, you must not forget that the Lifetime Allowance for pension savings is currently £1,073,100 increasing to £1,078,900 for 2021/22. A tax charge will arise on savings in excess of this amount.
Currently, pension savers aged 55 or older may flexibly access their pension savings, thought the government has confirmed plans to increase the minimum pension age to 57 from 2028. Currently, 25% of the savings may be received free of tax with the rest being treated as taxable income subject to income tax at your marginal rate. It is possible to take the entire savings pension as a lump sum or draw down on the savings over a number of years. Care must be taken and you should always consider the effect that drawing on your pension will have on your tax position and the ability to make future pension contributions.
Did you know that you can get tax relief for any gifts to charity if you make a Gift Aid declaration? You make your gift to the charity out of taxed income and the charity is able to claim back basic rate tax on the value of the gift. Higher rate and additional rate taxpayers are also able to obtain higher rate or additional rate tax relief on the gift, therefore, you should ensure that the donation is made by the spouse/civil partner who pays the highest rate of tax.
You should keep a record of all Gift Aid donations that you make but remember that you should only use Gift Aid when giving to charity if you are a taxpayer. If you are not a taxpayer, you should consider stopping making charitable donations using Gift Aid as this will give you a tax liability. You should instead make your donation without Gift Aid.
Gifts to charity are made free of Inheritance Tax, so remembering a charity in your Will can reduce the IHT that will be paid on your estate.
Capital Gains Tax
It is a good idea to consider your Capital Gains Tax position before the end of the tax year.
Each individual has an annual exemption for Capital Gains Tax (CGT) purposes. For 2020/21 the exemption is £12,300 and this is the amount of gains that may be made tax free this year. If you have not already used your annual exemption for the tax year, you may wish to consider doing so now. You should review your chargeable assets (for example, stocks and shares) and consider making disposals before 6 April 2021 to realise capital gains and utilise the annual exemption for the tax year before it is lost.
It is not possible to “bed and breakfast” shares by selling shares at a gain and immediately buying the shares back, as there are rules to prevent this from being effective. Instead, you could consider buying the shares back after 30 days, or immediately repurchasing the shares by your spouse/ civil partner or within your ISA.
As the end of the tax year approaches, this may also be a good time for us to review your Capital Gains Tax position for the year as you may wish to know if you have a Capital Gains Tax liability arising on disposals made since 6 April 2020. This will give you an opportunity to consider taking action by 5 April 2021 to reduce any charge to Capital Gains Tax that may arise, for instance, by selling further assets which are standing at a loss.
A husband and wife, or civil partners, each have their own annual exemptions, therefore, transferring assets to your spouse or civil partner may mean that you can each make gains of £12,300 tax free for 2020/21. Ideally, you should leave as much time as possible between making the transfer and the sale.
Capital Gains Tax for 2020/21 is payable on 31 January 2022. You could delay a significant disposal until after 5 April 2021 to delay paying the tax liability on the gain by 12 months (but not a disposal of residential property – see below).
Since 6 April 2020, a UK resident taxpayer is required to make a return and payment of Capital Gains Tax within 30 days following the completion of a disposal of a residential property in the UK or overseas. These new requirements will not apply, however, where the gain on disposal is not chargeable to CGT, for example where the gains are covered by private residence relief. Also from 6 April 2020, the Principal Private Residence Relief final period exemption was reduced from 18 months to just 9 months and Lettings Relief (currently worth up to £40,000 per person per property) was reformed so that it only applies in circumstances where the owner is in ‘shared occupancy’ with a tenant.
Non-UK resident taxpayers are required to report and pay Capital Gains Tax on all property and land situated in the UK within 30 days.
Sometimes shares and assets that you own become worthless. Should this occur, you can crystallise the loss without disposing of the asset by making a negligible value claim. In some circumstances, you can backdate the loss claim to either of the two tax years before the one in which the claim is made to offset the loss against gains arising in that earlier year.
Currently, Capital Gains Tax is charged at a rate of 10% or 20% (18% or 28% on residential property) depending upon your level of income.
Please contact us if you would like us to review your Capital Gains Tax position.
Inheritance Tax
Inheritance Tax is the tax charge that arises on certain lifetime gifts, on the value of your estate when you die, and on certain transfers in and out of trusts. IHT is currently payable at 40% on assets exceeding the nil rate band, currently £325,000, subject to any available exemptions. The nil rate band has been frozen at this level for many years though it is due to increase in line with inflation from 6 April 2021. The unused percentage of a deceased spouse’s nil rate band is transferable on the death of the second spouse. This could, potentially, give £650,000 of nil rate band before IHT becomes due.
A main residence nil rate band has been available since 6 April 2017 where a residence is left to a direct lineal descendant. Currently the main residence nil rate band is £175,000. For couples, this will give an additional allowance of £350,000. For estates with a net value that exceeds £2 million the main residence nil rate band will be tapered away.
It is important that your Will is reviewed carefully to make sure that your estate will be entitled to the main residence nil rate band, which could be worth up to £140,000 in Inheritance Tax savings, as there are a number of qualifying conditions which must be satisfied to qualify for this additional relief. In order to qualify, your estate on death must leave a residential property to lineal descendants which you must have lived in at some point during the period of ownership. Where someone has sold or given away their home, or downsized to a smaller property, they may still be able to get this relief. If, on death, you have left your estate including the property to a trust arrangement, your estate may not qualify for this relief.
If you own your own home and have some savings and other assets then your estate could be liable to IHT when you die. You should plan well ahead to minimise your liability to IHT.
A simple measure that you can use to reduce your potential IHT liability is to ensure that you fully utilise the annual exemption each year for gifts. For 2020/21 the annual exemption is £3,000 and, if you have not used your exemption for the preceding year, this amount doubles to £6,000. Additionally, small gifts of up to £250 per recipient may also be made each year and gifts made in consideration of marriage or civil partnership up to certain limits are also exempt from IHT. Although these limits are reasonably modest, they do add up over time. Other gifts made which exceed these amounts could, potentially, be chargeable to IHT should you not survive the gifts for a full 7 years.
Gifts to charities are exempt from Inheritance Tax.
Gifts made as part of your ‘normal expenditure out of income’ (not capital) are also exempt from IHT and we would be happy to advise you further on this.
You could consider introducing a programme of lifetime gifts to reduce the potential IHT liability on your estate. To completely escape a charge to IHT you will need to survive the gift by seven years and no longer continue to benefit from the gift yourself. The tax charge is tapered down where gifts exceed the nil rate band and are made between three and seven years before death. Lifetime gifts are one way that you may be able to significantly reduce your IHT liability with the added advantage that you can see the benefit that the gift has made in your lifetime.
You could also consider taking out a policy of life assurance to cover any potential IHT liability arising on your death. The policy should be written into trust in order that the proceeds do not form part of your estate when you die.
Please contact us if you would like us to review your potential liability to IHT and how best you may be able to plan to reduce this.
You should also review your Will to ensure that it is tax efficient, up to date and continues to reflect your wishes. We would be delighted to review your Will for you to ensure that it is tax efficient and we also offer a will drafting service to assist you in updating your Will. If you have not made a Will, then we would be happy to draft one for you. Please contact us if this is of interest to you.
CHILDREN
You may be liable to this tax charge if you, or your partner, have “adjusted net income” (income after deducting the gross amount of pension payments and charitable donations made under Gift Aid) of more than £50,000 and one of you receives Child Benefit. This tax charge may withdraw all or just part of the child benefit that has been received. The end of the tax year provides a good opportunity to consider with your partner whether or not you wish to claim Child Benefit or, perhaps, arranging your affairs to ensure that neither of you has adjusted net income of £50,000 or more. Making a pension contribution before 6 April 2021 could also be a useful way to reduce your adjusted income for the year to below £50,000. Please contact us to discuss this if you have any queries or need any help in deciding whether to make a claim or continue claiming this benefit. Please note that if your child is under 12 and you are not working or not earning enough to pay National Insurance contributions, claiming Child Benefit can help you qualify for State Pension Credits which will count towards your State Pension.
Junior ISAs allow you to invest money on behalf of a child under the age of 18. A parent or guardian must open the account on the child’s behalf but the money in the account belongs to the child, though they cannot withdraw it until they are 18. The Junior ISA limit is £9,000 for 2020/21. Any interest or investment gains are tax-free and, importantly, Junior ISAs are not caught by the parental settlements legislation.
A child is eligible for a pension from the day they are born. The maximum that may be contributed to the pension each year for the child is £2,880 and 20% tax relief will be added to this by the Government.