Over the past couple of weeks we've talked about how income tax and national insurance work.

For those of us who are building wealth, the logical next step is to look to save some money

by using some valuable reliefs. Okay, let me first say that I really do think tax is a good thing.

Clearly it's necessary for any developed economy to have a robust and healthy tax system.

You know it pays for the roads and the hospitals and the schools and stuff.

So I'm in favor of tax, okay?

But I'm also in favour of making use of any

reliefs that are available. We need to be under no illusion. Any government that

offers tax reliefs is making more tax somewhere else in the system. So if you get a relief for investing, say in a

venture capital trust, you're investing in a young startup company, by doing so

that company will grow, hopefully pay more corporation tax it'll employ more people

who will pay more income tax and national insurance who will buy more stuff and hence pay

VAT so you're getting a saving at one end, but on the all of the

parts of the tax system chances are the revenue is making even more money

thanks to your investment. Of course it's incredibly complex and nuanced. I don't begin to understand it.

But let's not be afraid of using these reliefs. They're there for a reason as an

incentive to save. So specifically I want to talk about income tax relief and salary sacrifice so let's put five minutes on the clock and say thank you to my friends at 7 Investment Management for continuing to sponsor the show and let's crack on.

Okay so let's talk about tax relief first and focus primarily on pensions.

So we talked about how we get taxed on our income a couple of weeks ago.

And yet the government gives you some of that tax back notionally when you make a pension contribution. So this happens in one of two ways.

If you're an employee, usually you pay your pension contribution off your gross salary and then get taxed on what's left. So if you make a

100 pound pension contribution you're essentially earning 100 pounds less and

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