Am I correct in saying that any tax relief on personal contributions is limited to £ 30,000?
30 November 2021
Question by Robert
If my company pays £10,000 per financial year into my private pension in the form of salary sacrifice. Am I correct in saying that any tax relief on personal contributions is limited to £ 30,000?
Answered by Boring Money
Thanks for your question.
You are correct we all get a maximum annual allowance of £40,000 per year. So if you are already making pension contributions of £10,000 that would leave you with £30,000 left.
Some things to consider:
Not everyone is entitled to the full £40,000, it is the minimum of your relevant earnings or £40,000. So if you earn £30,000 per year in salary then your annual allowance would be limited to £30,000 which would mean you now only have £20,000 left to use.
Carry forward. Unused annual allowance from the previous 3 tax years can be carried forward. This means you could potentially have an annual allowance of £160,000 (£40,000 from the previous 3 tax years and £40,000 in this one). There are some rules to this and it is important to make sure that you are eligible before making contributions over this years annual allowance.
If you would like to have a chat about any of this please let me know.
Independent Financial Adviser