Contributions, annual allowance and tax relief

Watch our webinar

Jim Grant and Fiona Hanrahan dig deeper into the technicalities of tax relief and the annual allowance in our webinar master-class*.

Tax relief and the annual allowance presentation 

*This webinar was recorded on 30 January 2019 and figures are based on the 2018/19 tax year.

The basics

This analysis focuses on pension contributions, who can pay them and if there are any restrictions.

• Pension contributions - All you need to know

Tax relief - employer & member contributions

The tax relief on contributions is arguably the major selling point of pensions.

An employer can pay any amount of contribution for one of their staff but it's up to their local tax office to decide whether the whole contribution receives tax relief. A member can pay as much as they like into a pension but there's a limit on the amount of tax relief they will be given.

• Employer contributions and tax relief
• Member contributions - tax relief and annual allowance

For higher earners, further tax relief may be given. In some scenarios, up to 60% tax relief is available.

• Member contributions and higher rate tax relief
• How to get 60% tax relief on pension contributions

The bands and rates of Scottish income tax differ from the rest of the UK.

• Income Tax Rates & Allowances (UK excluding Scotland)
• Income Tax Rates & Allowances (Scotland)

Annual allowance and pension input periods and amounts

The annual allowance is a limit on the amount of contributions that can be made without incurring a tax charge.

• Annual allowance
• An explanation of the money purchase annual allowance (MPAA)

These articles explain how pension tax relief for individuals with high incomes will be restricted by a tapered reduction in the amount of the annual allowance.

• Tapering of annual allowance for high incomes
• Examples of how the tapered annual allowance works

These articles explain the transitional pension input period rules for DC and DB arrangements.

• Transitional rules for DC schemes
• Transitional rules for DB schemes

This article explains how pension input amounts operated since the 8 July 2015 budget announcements. 

• Pension input periods and pension input amounts (post 8 July 2015 rules)

This article explains how pension input periods operated prior to the 8 July 2015 budget announcements. Since then pension input periods are aligned with tax years for all registered pension schemes.

• Pension input periods and pension input amounts (pre 8 July 2015 rules)

Carry forward

There are potential ways that tax charges can be avoided, most notably by using 'carry forward'.

• Carry forward
• Carry forward in the 2015-16 transitional year
• Carry forward of unused annual allowance - case studies

Scheme pays

This article explains how scheme pays works and the conditions that apply.

• Scheme pays

Contributions

Anyone can become or remain a member of a UK pension scheme, regardless of nationality and UK tax treatment. However, tax relief on member contributions will only be available to those who are 'relevant UK individuals'. 

• Contributions to registered schemes for overseas individuals

In specie

In specie transactions can involve pension schemes in two different ways - in specie transfers and in specie contributions. This article explains the difference.

• In specie contributions
• In specie transfers and contributions - what's the difference?

Other ways to avoid (or mitigate) tax charges

As well as carry forward, there are some other ways that tax charges can be avoided.

• Child Benefit - avoiding the tax charge

And here are a few related topics:

• In specie contributions
• Recycling of tax-free cash

Frequently asked questions

• Salary exchange
• Contributions and annual allowance