Annual pension contribution limits

e3ss39

The annual limit for pension contributions is £40k. Does this include pension tax relief?

So as an easy example.. someone earning £100k can actually only put about £28k in their pension because government tax relief at 40% rate will be about £12k??

Is this right?

MallyGirl

It does include pension tax relief but 40% taxpayers only get 20% going in to the pension and the other 20% comes back via their tax code

Notnewnotold

Higher rate taxpayers can contribute 32k directly, and not 28 as you mention - the 32k will gross up to 40k with basic relief, and a further 8k of relief can be claimed via self assessment.

So the actual 'net' contribution would end up being 24k

HappyHarry

As Notnewnotold says above, plus you may be able to contribute further using carry forward, if you have unused allowance from the last three years.

NoMore

It also includes employer contributions, so personal contribution may be significantly less unless using carryover.

Albermarle

MallyGirl said:

It does include pension tax relief but 40% taxpayers only get 20% going in to the pension and the other 20% comes back via their tax code

If contributions are made after tax has been paid ( as so called relief at source scheme) then the above is correct .
If contributions are paid before tax is paid ( net pay scheme) or by salary sacrifice , then the full 40% tax relief goes into the pension, by virtue of the fact that you have not paid any tax on it in the first place .

dunstonh

e3ss39 said:

The annual limit for pension contributions is £40k. Does this include pension tax relief?

So as an easy example.. someone earning £100k can actually only put about £28k in their pension because government tax relief at 40% rate will be about £12k??

Is this right?

Pension contributions are treated as gross of tax relief.  So when you see £40k they mean £40k gross.  

Someone earning £100k may be able to pay £100k into the pension and get tax relief if they have unused allowances over the previous 3 years.  Or if the employer contribution (such as a director on own company).