Provision of tax relief
- The maximum individual contribution that is eligible for tax relief is the greater of:
i) £3,600.00 per annum
ii) 100% of relevant UK earnings each year. i.e if you earn £10k you can contribute up to £10k and claim full tax relief
- Once you pay more than this, you will receive no tax relief on the excess.
- It is also possible to make a pension contribution on behalf of someone else, e.g. on behalf of a child or grandchild or a non-working spouse.
- The eligibility to receive tax relief on the contribution is based on the pension holder.
Question - Use Your Note Taker To Jot Down Ideas / Calculations
Susan works for a company on a part-time basis. She earns £8,000 p.a. in 2018/19. What is the maximum contribution that she can make in 2018/19 if the entire contribution is to be eligible for tax relief?
a) £3,600
b) £40,000
c) £8,000
d) £10,000
C)
The maximum any individual can contribute into a pension scheme is the greater of £3,600 or 100% of UK Relevant earnings. In order to get full tax relief on the contribution we also have to factor in the £40,000 annual allowance which for Susan isn’t a worry. Therefore she can only contribution £8,000 gross into the pension.