Pension Tax Relief 2010 Explained

Pension Tax Relief 2010 Rules Explained (2010 to 5 April 2011)

*** NEW £50,000 ANNUAL ALLOWANCE LIMIT STARTS APRIL 2011 ***

Are you entitled to Pension Tax Relief? Only UK Relevant Individuals receive tax incentives. There were four sets of rules for pension tax relief for 2010:

Low Earners and Non TaxPayers

20% Pension Tax relief (even as a non-yax payer) on your own contributions but limited to a maximum gross yearly contribution into your pension of £3,600 each year if you have no earnings or if you have earnings below £3,600.

20% Tax Payers = 20% Pension Tax Relief:

In simple terms, if you pay income tax at Basic Rate Tax (20% from 6 April 2008), you receive the same income tax relief on pension contributions that you pay.
If you pay in £80, the government will add £20 in pension tax relief to make it up to £100.
Put another way, for every £1 you invest, the government will give pension tax relief and add an extra 25p to your pension.

40% Higher Rate Tax Payers = 40% Pension Tax Relief ... but be careful if you are a high earner ..

Higher rate tax payers may receive up to 40% pension tax relief.
20% Basic Tax Relief is usually collected in the same way as 20% Tax Payers - see above.
20% High Tax is usually granted by a tax refund when you file your tax return.

£130,000 + High Earner? Do you earn this or more? Pension Tax Relief has changed dramatically for you.

Other Useful Links

High Earners - Annual Allowance - Income Calculation - Below £130,000 - Between £130,000/£150,000 - Over £150,000