With the tax year end looming, investors should make the most of whatever tax breaks are available to them.

Tom McPhail, head of pensions research at Hargreaves Lansdown, highlights 7 ways to make the most of the pensions tax relief rules ahead of the year end.

Investing for a non-earning spouse

The £3,600 universal allowance means that a non-earning spouse can still build up a pension fund. The over 65 personal income allowance is £9490. This means for example that a 65 year old woman with no other sources of income in retirement could draw from a £330,000 pension fund tax free. But only if they have used their annual allowance of £3,600 in the years before age 65 to build up the fund in the first place.

Investing for children

Every individual has a £3,600 yearly pension contribution allowance which can be paid by parents or grandparents. Not only does this help the next generation to avoid their own individual pension crisis, it avoids inheritance tax too and in the process it can more than double the value of a bequest.

Investing for income

Income investors over the age of 55 can use the £3,600 allowance to pay a pension contribution, claim tax relief and immediately draw an income. What’s more, investors over the age of 65 with an income of between £22,900 and £28,930 can achieve an effective tax relief rate of 30% by using pension contributions to increase their age related personal allowance.

Crystallise gains

Investors can make pension contributions even if they have no cash available. In fact, they can receive tax relief on investments they already own and in the process they can take advantage of their annual Capital Gains Tax exemption. They can do this by selling an asset such as some shares, to crystallise a gain and to use up their CGT exemption. Then they can invest the money in a SIPP, claim tax relief on the contribution and repurchase the investment in the tax exempt pension fund.

A window of opportunity

For higher earning investors, those with taxable income above £130,000 who may be caught by the new restrictions on tax relief, there is a window of opportunity for this tax year and the next. Investors can contribute up to £30,000 (subject to restrictions) and receive higher rate relief on their contribution, at a rate of 40% this tax year and 50% next year. After that, depending upon their level of income they may find themselves restricted to just 20% relief. On a contribution of £30,000 for example, that would mean a loss of between £6,000 and £9,000 of tax relief. Best do it now.

Retiring before 55

The deadline for retiring before age 55 is the end of this tax year, after which investors are locked out for up to five years. For most people currently between the ages of 50 and 55 this is unlikely to be an issue, but for anyone who does want to get hold of their benefits before age 55, the door is closing fast.

Higher rate tax relief

Higher rate tax payers who are eligible for 40% relief can make a pension contribution now and receive their higher rate relief through an immediate adjustment to their tax code for the new tax year. This means that they don’t have to wait until the end of the tax year to claim their higher rate relief. The adjusted tax code will mean paying less tax every month and higher take home pay.