Pensions: How Much I Can Put In

happylass55

I was interested to see your thread on pensions and the very complicated way of trying to work out tax relief!!

My question is now, if you want to receive 40% tax relief on all your contributions how much can you put in if for example you earned £100k. If you have a personal allowance of £5225 and the next section of £34,600 is taxed at 20%, then how do you work out how much you can actually put in and receive the full 40% relief? On the remaining approx £60k left - does this relate the amount you put in or the grossed up amount? I am have been back and forward between FA and accountant and am very confused!

MikeJones_2

Hi happylass55,

If you're talking about a personal pension then take a look at this page: How tax relief on personal pensions works (DirectGov)

Hope that helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

jem16

happylass55 wrote: »

I was interested to see your thread on pensions and the very complicated way of trying to work out tax relief!!

My question is now, if you want to receive 40% tax relief on all your contributions how much can you put in if for example you earned £100k. If you have a personal allowance of £5225 and the next section of £34,600 is taxed at 20%, then how do you work out how much you can actually put in and receive the full 40% relief? On the remaining approx £60k left - does this relate the amount you put in or the grossed up amount? I am have been back and forward between FA and accountant and am very confused!

Personal allowance this tax year is £6035. Higher rate tax starts at £34,800 plus personal allowance of £6035 so anything over £40,835 is taxed at 40%.

In your example of earning £100k, £59,165 would be able to attract tax relief at 40%. This is the gross amount. If you pay this into a personal pension you would pay £47,322 (80%). The pension company would claim the 20% from HMRC making your contribution up to £59,165. You would enter this gross amount into your tax return and receive the other 20% tax relief as a rebate.

If it was a compnay pension where contributions are taken before tax is paid you could pay the whole £59,165 into your pension and 40% tax relief is automatic as your taxable income is rediced.