Private Pension when not working

Hoymoon

Hi, I live off a widow pension, carers allowance for my daughter and interest from savings, total income is about £20,000. I was thinking I should start a pension and wanted to put in 2880 in a year but would the government add to this with tax relief as I don't work? From what I've read you have to earn under a certain amount and I don't earn anything but I do have taxable income, please help as i'm very confused and not sure who to ask. Many thanks 

tr7phil

Yes, you'll get basic rate tax relief on £2880 per year regardless of whether you paid any tax or not.

Albermarle

tr7phil said:

Yes, you'll get basic rate tax relief on £2880 per year regardless of whether you paid any tax or not.

OP - You will get the tax relief even if you had no income at all.

In practice what happens is that the pension provider will automatically claim basic rate tax relief for you, on any contribution you make.
So it is up to you not to add more than you are allowed - which is £2880. 

BlackKnightMonty

tr7phil said:

Yes, you'll get basic rate tax relief on £2880 per year regardless of whether you paid any tax or not.

Wow! Free money.

What’s the maximum you can contribute and still get the basic rate tax relief, and how much free money is that?

Albermarle

BlackKnightMonty said:

tr7phil said:

Yes, you'll get basic rate tax relief on £2880 per year regardless of whether you paid any tax or not.

Wow! Free money.

What’s the maximum you can contribute and still get the basic rate tax relief, and how much free money is that?

If you are in employment, you can add up to you gross salary, including the tax relief. This still applies if you are a low earner and pay no actual tax.
If you have no employment earnings, you can add £2880 and £720 tax relief will be added.

On withdrawal you can take 25% tax free and the rest is taxable income. Whether you actually pay tax on it will depend on you tax situation at the time. 

artyboy

Although higher and additional tax relief is even better. For that matter, making contributions to get out of that "effectively 60%" tax band between £100-125k is even better still.

Add in salary sacrifice to also save the NI, and then also employee matching, and then tax free compound growth; and it's the most tax efficient investment that you'll ever make.

Well, that is, until it is slowly gutted by our lords and masters...

Albermarle

artyboy said:

Although higher and additional tax relief is even better. For that matter, making contributions to get out of that "effectively 60%" tax band between £100-125k is even better still.

Add in salary sacrifice to also save the NI, and then also employee matching, and then tax free compound growth; and it's the most tax efficient investment that you'll ever make.

Well, that is, until it is slowly gutted by our lords and masters...

The Treasury giveth ( in the form of generous tax relief) and then the Treasury taketh away ( some of it anyway).