Pensions and tax
Pension tax relief – eligibility
Tax relief can only be claimed for the tax year the contribution is actually made. How much you save towards a pension is usually tax-free, up to certain limits, see below for a detailsed breakdown.
- You cannot get tax relief on contributions that are more than 100% of your earnings in a tax year, and
- regardless of your earnings, you may pay tax on contributions over £40,000 gross in a year, unless you have any unused annual allowance in the previous three tax years.
- If you have previously taken benefits from a defined contribution pension scheme, tax would be payable on your contributions to a defined contribution scheme which are over 100% of your earnings or the Money Purchase Annual Allowance (MPAA whichever is lower. The MPAA is currently £10,000 gross p.a. but the government has announced that this is reducing to £4,000 gross p.a. and will be backdated to apply from 6th April 2017*. If you are contributing towards a defined benefit scheme, the limit is still 100% of your earnings or £40,000, whichever is lower.
You also cannot get tax relief if your pension provider isn’t registered with HM Revenue and Customs
If you don’t have earnings, you can still get tax relief on your contributions up to £2,880 net.
If you are 75 or older you can technically contribute towards a pension scheme, but your contributions will not qualify for tax relief.
There are different rules that apply if you are not currently UK resident or paying into a qualifying overseas pension.
*The reduction in the Money Purchase Annual Allowance is still subject to Parliamentary approval.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.
- This page explains about how and when tax relief applies
- You can read more about tax and pensions here