PENSIONS – tax relief on pension contributions
Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
Any contribution in excess of £40,000 (previously £50,000 for tax years to 2013/2014), whether personal or by the employer, may be subject to income tax on the individual.
Where £40,000 (previously £50,000) limit is not fully used it may be possible to carry the unused amount forward for three years.
Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.
A tax charge potentially arises if the value of the pension at retirement exceeds the lifetime allowance.
The pension scheme lifetime allowance for 2012/13 is £1,5m this will reduce to £1.25m from 2014/15
From the 6 Aprill 2011 tax relief for pension contributions will be restricted for people with incomes over £150,000 – higher rate relief will be progressively withdrawn until, for those with incomes of £180,000 or more, relief will be given at he basic rate only.