Paying a lump sum into my pension

Sarahspangles

Your relevant UK earnings, which are eligible for pension tax relief, do not include savings interest. So you can contribute up to £42k gross. If your provider gives you tax ‘relief at source’ you can contribute 80% of £42k and HMRC will pay the rest as tax relief into the pension account.

Dazed_and_C0nfused

VincentHanna said:

For the past 3 years my pension contributions have been roughly 5 k per year so think I'm right in saying I can put in up to £60k per year - 5k for each year. Effectively meaning I could put in 55k x 3 if I wanted to? Or is it based on your salary, ie, 42k max for every year (based on max salary of 42k)

I think you have completely misunderstood how pensions work.

You cannot go back in time and change anything for a previous tax year.

If your earnings for pension purposes are £42k then why do you think you can contribute more than £42k?  This question is not related to if you have the money available to pay more than £42k

QrizB

VincentHanna said:

For the past 3 years my pension contributions have been roughly 5 k per year

Assuming that's £5k gross, with £42k of earned income you can contribute a further £37k gross.

£29600 net plus £7400 relief at source.

If it's £5k net, £6250 gross then the numbers are £35750 / £28600 / £7150 respectively.

VincentHanna

·        Is pension tax relief ONLY on earnings from salary? For example, if I earn £42,000 salary and have savings interest of £20,000 per year my total taxable income is £62,000 per year – tax free allowance - pension contributions. Will I ONLY get pension tax relief on my earnings from salary? In other words, tax relief @ 20% only on £42,000?

·        Per year I am allowed up to £60K per year to contribute to my pension and this can be backdated for 3 years. If my salary is £42,000 per year, then is this my maximum per year? For example, if my salary is £42,000 per year and my pension contributions for the year were £12K I could top up my pension by £30K from savings I have and receive 20% tax relief on 30K? If my salary/pension contributions were the same for the previous 3 years I could claim the same amount, ie, 30K x 3 = £90K?

MallyGirl

you can only go back and use previous years' allowances once you have exceeded the current year's allowance of £60k. You do not earn enough to exceed the current year's allowance of £60k

SVaz

Yes.  Only earned income and it includes employer’s contribution.

You can only pay £60k if you earn £60k.

You have to use this year’s £60k fully before you can go back. 

ONLY people who earn and pay £60k can do this if they didn’t use the full allowance in previous years.

It’s VERY unfair and only benefits high earners. 

NoMore

SVaz said:

Yes.  Only earned income and it includes employer’s contribution.

You can only pay £60k if you earn £60k.

You have to use this year’s £60k fully before you can go back. 

ONLY people who earn and pay £60k can do this if they didn’t use the full allowance in previous years.

It’s VERY unfair and only benefits high earners. 

A generous employer or a LTD company director can take advantage of AA via employer contributions and neither of those has to be a person who earns over 60k.

I've seen you say this before, but I don't understand why its VERY unfair ?

If you accept that you should only get tax relief based upon your earnings then the AA actually limits High earners in that it may stop them getting all their earnings into a pension and getting tax relief, unlike a low earner who can put all their earnings into a pension and get tax relief on all of it.

Or is it unfair that you only get tax relief on your earnings, in which case I'm not sure what you expect instead ?

turnemc

To get tax relief you can put up to £60k in if you earn £60k or more. If you earn less then the maximum is you earnings (£42k).
If you want to pay an extra £50k lump in your best bet is to put some in this tax year and some in April (I.e. next tax year). This means you can ensure you’re under the £42k in each tax year.

Cobbler_tone

Not forgetting that any redundancy payments over £30k (which anyone may be lucky enough to get) are classed as earnings, which often open up options which are usually unavailable.

Sarahspangles

VincentHanna said:

·        Is pension tax relief ONLY on earnings from salary? For example, if I earn £42,000 salary and have savings interest of £20,000 per year my total taxable income is £62,000 per year – tax free allowance - pension contributions. Will I ONLY get pension tax relief on my earnings from salary? In other words, tax relief @ 20% only on £42,000?

·        Per year I am allowed up to £60K per year to contribute to my pension and this can be backdated for 3 years. If my salary is £42,000 per year, then is this my maximum per year? For example, if my salary is £42,000 per year and my pension contributions for the year were £12K I could top up my pension by £30K from savings I have and receive 20% tax relief on 30K? If my salary/pension contributions were the same for the previous 3 years I could claim the same amount, ie, 30K x 3 = £90K?

Yes, pension tax relief is only on relevant UK earnings. There’s no point getting into any of the detail about Annual Allowance unless you earn over £60k unless you are also contributing to a defined benefit pension when there are scenarios to be aware of. 

There’s a list here, there are some other types of earnings that qualify, but not savings or investment income. Or buy to let income, which is the other type which confuses people.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/member-contributions-tax-relief-and-annual-allowance/