Monday 15th July 2024
What is Tax Relief?
Income tax relief allows you to exclude some of your income from assessment for income tax in exchange for making a pension contribution.
What this means is that if you earn £50,000 but receive tax relief of £10,000 for your income, you will pay tax as though you were earning only £40,000 instead.
What do I need to do to get tax relief with pensions?
In order to qualify for tax relief you need to make qualifying contributions,
The tax relief available for making pension contributions is a reward from the government for committing money now to look after yourself later in life, making you less likely to need state support in retirement.
How much tax relief can I get?
The amount of personal tax relief you can claim depends on how much you pay into your pension and your taxable income. The government has set an annual cap on the value of contributions, which is called the Annual Allowance. The current Annual Allowance is £60,000.
How is tax relief paid?
If you make a contribution to a plan operating relief at source, you make your personal contribution net of basic rate tax and the provider claims the tax relief from HMRC on your behalf. If you are a higher or additional rate taxpayer, you would apply for extra tax relief through your self-assessment tax return.
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