Having a stakeholder pension in order to get tax relief - low earner

redpanda1981

Could anyone help clarify something for me?

Last tax year I was not working and so paid £2,880 into a in stakeholder pension plan order to receive the tax benefit (so actual amount into the pension was £3,600). This tax year I have a small job that will give me an income of around £4000-£5000 for the year. With this role I am enrolled into a Local Government defined benefit pension scheme paying around £10pm which my employer also contributes around £20 per month.

As I don’t earn enough to pay income tax, can I still pay the £3,600 gross into the stakeholder pension plan in order to receive the tax relief? My understanding is that as long as the total amount I pay into pensions doesn’t exceed my earnings, I am ok and can receive the tax benefit of the stakeholder pension.

There’s clear wording on if you earn below £3,600 or do not earn. But I’m not fully clear if you earn more than £3,600 but less than the income tax personal allowance and therefore don’t pay tax.

Paul_Herring

As I don’t earn enough to pay income tax, can I still pay the £3,600 gross into the stakeholder pension plan in order to receive the tax relief?

You can pay up to your gross wage (minus any contributed via the defined benefit scheme) into your stakeholder, and get the tax relief.

Using your £4k-£5k -(12x£30) => £3,640-£4,640 (gross, of course - what you actually put in will be 80% of this to take into account the relief.)

As with the £3,600 if you're not earning, you'll be getting tax relief on wages that didn't actually get taxed to begin with.

redpanda1981

Thank you!

A friend said to forget the stakeholder pension but use the company pension instead as I would get the contributions...but my understanding was I could also use the stakeholder at the same time to get some tax relief.