tax relief on pension

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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theGrinchtheGrinch Forumite
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I have a quick question for a parent.

parent is on £15,600 per annum (gross) with an additional (approx) £5,000 of overtime for 2008/09.

Is the max earnings (for purpose of tax relief £15,600 (basic salary) or £20,600 (earnings)? This relates to tax relief and a SIPP.

thanks in advance.
"enough is a feast"...old Buddist proverb

Replies

  • dunstonhdunstonh Forumite
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    The fact its a SIPP doesnt matter. Pension rules apply to personal, stakeholder and SIPP.

    Contributions getting tax relief are on the full earned income, including overtime. So, £20600 in this case.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 29 April 2009 at 8:57PM
    theGrinchtheGrinch Forumite
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    edited 29 April 2009 at 8:57PM
    thanks for the answer. I take it that although my parent receives and is infact taxed on a state pension of £7,000 (as taxable earnings) that this isnt classified as "earned income", or is it?

    on a question of timing. lets say that for the tax year 2008/09 the earnings including overtime came to £20,600, which the final monthly salary was paid on 31st March. When is the cut off for the £16,480 (80% of £20,600) to be paid come ineffect?

    I hope its clear as I may have been a bit cumbersome in my question, but hopefully you get the gist.

    thanks
    "enough is a feast"...old Buddist proverb
  • Debt_Free_ChickDebt_Free_Chick Forumite
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    dunstonh wrote: »
    The fact its a SIPP doesnt matter. Pension rules apply to personal, stakeholder and SIPP.

    Contributions getting tax relief are on the full earned income, including overtime. So, £20600 in this case.

    Dunstonh

    Isn't the tax relief limited though to the tax actually paid? i.e. the maximum contribution that can receive tax relief is that equal to the earnings chargeable to income tax.

    So one would need to deduct tax-free allowances in that year ....? :confused:
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • theGrinchtheGrinch Forumite
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    bump :)

    dunstonh, thanks for the answer. I take it that although my parent receives and is infact taxed on a state pension of £7,000 (as taxable earnings) that this isnt classified as "earned income", or is it?

    on a question of timing. lets say that for the tax year 2008/09 the earnings including overtime came to £20,600, which the final monthly salary was paid on 31st March. When is the cut off for the £16,480 (80% of £20,600) to be paid come ineffect?

    I hope its clear as I may have been a bit cumbersome in my question, but hopefully you get the gist.

    thanks
    "enough is a feast"...old Buddist proverb
  • Debt_Free_ChickDebt_Free_Chick Forumite
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    theGrinch wrote: »
    bump :)

    dunstonh, thanks for the answer. I take it that although my parent receives and is infact taxed on a state pension of £7,000 (as taxable earnings) that this isnt classified as "earned income", or is it?


    Ignore it for the purpose of "income" for pension contributions - or at least, for tax relief on contributions.
    on a question of timing. lets say that for the tax year 2008/09 the earnings including overtime came to £20,600, which the final monthly salary was paid on 31st March. When is the cut off for the £16,480 (80% of £20,600) to be paid come ineffect?

    I hope its clear as I may have been a bit cumbersome in my question, but hopefully you get the gist.

    thanks


    It's tax years. So use the taxable pay received in the tax year. If the O/T was actually paid on 31 March, it should be included. But if it was simply earned on 31 March and not paid until, say, 30 April then it's included in the following (tax) year's pay.

    Use pay for the tax year as that's the base for the assessment of relief.
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • dunstonhdunstonh Forumite
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    Isn't the tax relief limited though to the tax actually paid? i.e. the maximum contribution that can receive tax relief is that equal to the earnings chargeable to income tax.

    Only if you get into higher rate. Everyone gets basic relief even if they pay no tax.

    The income has to be employment/self employment income. Disregard everything else. If there is no earned income or its below £3600 then you are allowed to pay £3600 a year into a pension and get tax relief.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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