Personal Pensions

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 2018/19 is £1,030,000.

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Employee’s Contribution Employer’s Contribution
Earnings in range Contribution Table A Contribution Table B Contribution Table C Contribution Table D
 Up to £112pw (£663pm) Nil Nil  Nil Nil
 £112.01 – £155pw Nil Nil  Nil Nil
 £155.01 – £827pw  12%  5.85%  Nil Nil
 Over £827.01pw  2%  2%  Nil Nil
The reduced rate payable by certain married women and widows will remain 5.85% between the Primary Threshold and the Upper Earnings Limit (£112.01 and £155 a week for 2016/17),plus 2% on earnings above the Upper Earnings Limit.
Class 1A (employers only) : 13.8% based on taxable benefits excluding childcare
Class 1B (employers only) : 13.8% in respect of amounts in PAYE settlement agreement
Class 2 – self-employed flat rate: £2.80 per week if earnings are over £5,965pa. The special rate for Share Fishermen £3.40 per week and that for Volunteer Development workers £5.55 per week.
Class 3 – Voluntary: £14.10 per week
Class 3A – Voluntary: which those reaching State Pension age by 5 April 2016 will be able to pay to increase their entitlement to an Additional Pension (SERPS/S2P), will not be available until October 2015.
Class 4* – Self-employed: 9% on profits between £8,000 and £43,000pa, 2% over £43,000pa
*Exemption applies if state retirement age was reached by 6 April 2016
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