Pension contributions - maximum allowance
Written by Charlie Palmer on 16/12/2019

You can make unlimited contributions to a UK registered pension.

But tax relief is only available to individuals who have not attained age 75 and is limited to contributions under 100% of Relevant UK Earnings (very broadly his/her earnings from employment or a trade or profession) and £3,600 gross (£2,880 net).

 

There is no restriction on the maximum pension contribution that can be paid by an employer to an individual’s pension plan.

The employer's entitlement to tax relief will only come on any contribution that is deemed by HMRC to have been paid ‘wholly and exclusively’ for the purposes of the trade.

 

Any pension contribution for an employee who is not a director or close relative of a director will almost certainly be allowed for tax relief purposes.

The position regarding directors and their relatives is complex and you’ll need the company accountant for this.

 

An employer contribution is normally allowable in the employer accounting period in which it is paid, but under corporation tax rules this could effectively be carried back to the immediately preceding accounting period where the payment of the contribution results in the company making, or increasing, a loss in the accounting period concerned.

 The annual allowance sets the limit on the total amount of tax relieved savings that can be made by or on behalf of an individual in each tax year.

The standard annual allowance is £40,000 for 2019/20.

The tapered annual allowance reduces the individual’s annual allowance by £1 for every £2 of ‘adjusted income’ over £150,000, but tapering does not apply for income under £110,000.        

 Carry forward is able to take advantage of any unused annual allowance over the three immediately preceding tax years.

 

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