In the UK, every time an individual makes a qualifying contribution to a registered pension, they enjoy tax relief.
This relief is either enjoyed at the source or by claiming through your self-assessment.
The restriction for tax relief.
To be able to enjoy this relief you should have actually earned £3,600 in a year or 100% of your relevant income.
Your relevant income is your income from your employment such as your salary, bonus, wages, benefit in kind etc. or your employment income or some other income that qualifies as relevant income as well.
A cap on pension relief.
However, HMRC has put a cap in place just to limit the yearly tax relief an individual can claim. In this tax year, 2018/19 is £40,000.
Good news on the unused annual allowance.
You can carry back your unused annual allowance for up to three years if certain conditions are met.
Conditions for rolling back unused annual allowance
- You have to be making contributions to the registered in the tax year you want to roll back to claim tax relief.
- You should have earned that particular amount you’re planning to roll back in that particular tax year. For example, if you want to carry back to 2017/18 you should be registered in the UK pension in that year and earned the amount in that tax year.
Tax planning before the year ends.
If you would like to make more contributions (Over £40,000) in the next tax year and still enjoy more tax relief, Our Northampton accountants can guide you through the steps below:
Steps to take to enjoy tax relief.
- If you are already contributing to a pot within the last 3 years, you can roll back your unused allowance.
- If not registered, join a scheme before the year-end. You can then roll back the 2018/19 unused allowance in 2019/20.
Conclusion.
If you’d like to put more into your pension next year, you’re already earning enough this tax year.
It’s advisable that before the end of this tax year you register into a pension and put some in and then you can roll back some of the unused allowances into next year’s one.
To read more on pension tax relief in the UK.
kindly HTTP:// clickhttps://www.gov.uk/tax-on-your-private-pension/pension-tax-relief