Contributions that qualify for tax relief

A relievable pension contribution is a contribution paid to a registered pension scheme by or on behalf of a member of that scheme. The contribution can be paid by the individual member or by a third party on behalf of the member.

To qualify for a tax year, the member must be a relevant UK individual.  A member is a relevant UK individual if:

a) the member has relevant UK earnings chargeable to income tax for that tax year,
b) the member is resident in the United Kingdom at some time during that tax year,
c) the member was resident in the UK at some time during the five tax years immediately before that tax year and when they joined the pension scheme, or
d) the member, or their spouse/civil partner, has for the tax year general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003.

For these purposes, “relevant UK earnings” means:

a) employment income chargeable to tax under Section 7(2) ITEPA 2003,
b) income which is chargeable under Part 2 of ITTOIA 2005 and which is immediately derived from the carrying on of a trade, profession or a vocation (whether individually or as a partner in a partnership),
c) patent income treated as earned income under section 833 (5B) ICTA 1988, and
d) general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003.

Relevant UK earnings that are not subject to UK tax due to double taxation agreements will not count for these purposes.

The maximum amount of contributions on which a member can claim relief in any tax year is the greater of
• the ‘basic amount’ – currently £3600, and
• the amount of the individual’s relevant UK earnings for the tax year.

No tax relief is payable on contributions made after the member’s 75th birthday, or if they are taking flexible drawdown.
Total contributions for tax relief are also restricted by the annual allowance.

Employer contributions

Contributions may be made on behalf of the scheme member by their employer.

Tax relief cannot be claimed by either the pension scheme or the member.  Relief may be claimed by the employer according to their line of business.

For the typical case of an employer conducting a trade or profession, employer contributions incurred wholly and exclusively for the purposes of their trade or profession are deducible as an expense (ICTA\S74(1)(a) - corporation tax and ITTOIA\S34 - income tax).


________________________________________________________________________________________________________________________________________________________
Annual allowance and carry forward
________________________________________________________________________________________________________________________________________________________

All statements concerning the tax treatment of products and their benefits are based on our understanding of the current law and HM Revenue & Customs (HMRC) practice and are for general guidance only. Whilst every effort has been made to ensure accuracy, no liability can be accepted for any errors or omissions. Levels and bases of, and reliefs from, taxation are subject to change.

111220