Personal pension contributions value for tax relief

sarahbythesea

Hoping someone can help me as I want to put some additional money into my personal pension.

my gross pay is c£20k and I get £1.2k deducted for my employer pension already, but what’s the maximum I can put into my personal pension that will then attract tax relief.

im thinking it’s going to be £20k - £1.2k - £12.6k(annual personal tax allowance) so £6.2k that would then attract 20% tax relief when I contribute to my personal pension?

im thinking I have to deduct the personal tax allowance as surely the government won’t be giving me tax relief on this value ?

thanks for anyone who can help !

QrizB

If you are making Relief At Source contributions to a personal pension, you can get tax relief (up to your gross earnings) even where you haven't paid any tax.

If your salary is £20k and you've already contributed £1.2k gross, you could contribute another £18.8k gross.

To contribute £18.8k gross you'd pay about £15k into your pension and gain about £3.75k in tax relief.

Linton

You can contribute up to the whole of your gross pay into pensions and get the 20% rebate even though you did not pay tax on all  the money.  So in your case you could contribute an extra £20K-£1.2K= £18.8K.

You do this by paying in 80% X £18.8K= £15.04K into your personal pernsion.  HMRC then increase this by the missing 20% (£3.76K).

Albermarle

im thinking I have to deduct the personal tax allowance as surely the government won’t be giving me tax relief on this value ?

You are thinking wrong.

Max tax relief is calculated using your gross salary. How much tax you actually do or don't pay is not relevant.

sarahbythesea

Thanks everyone that’s really helpful and clarifies the situation completely 👍

Doctor_Who

Albermarle said:

im thinking I have to deduct the personal tax allowance as surely the government won’t be giving me tax relief on this value ?

You are thinking wrong.

Max tax relief is calculated using your gross salary. How much tax you actually do or don't pay is not relevant.

Just as an example of what Albermarle said - if you earned £10K you could add £8K net to your pension and receive £2K RAS from HMRC, making £10K gross. And you would pay zero income tax since your earnings are below your personal allowance.