tax relief for pensions

[minerva]

I know that they were changing the rules about higher (40%) tax rate payers and tax relief in private pensions. Does anyone know if they did. Or even what sort of tax relief I will get as a 40% payer...

Thank you!

[Ghood]

You still get tax relief at your highest rate and can do so on conntributions upto £255,000 for this tax year ( handy if you are a plumber )

Go to HMRC for full details.

Remember, that whilst you get relief on the way in, your pension income is taxed just like wages! Also if you only earn £1000 that is taxed at 40% and you pay in £2000 to a pension then the first £1000 will only cost you £600 but the second £1000 will cost you £800.

[B0bman]

That's not quite true. Should you be fortunate enough to earn over £150k pa (either in this year or the last three I believe) you are effectively limited to your higher rate of tax relief on the first £20k gross of contributions.

[Ghood]

Nothing in my post is 'not quite true '

The question I responded to was about 40% tax relief , yes you still get it and there are limits, this years is £255,000. If not, best you contact HMRC and get them to correct their web site!

There is a limit that involves a £20,000 limit and it does go back three years. This is only for people who suddenly alter their contributions ahead of April 2011 and its why for full details, you should visit the HMRC web site.

[B0bman]

I'd like to know how a 40% tax payer could get relief on a pension contribution of £255k at their 'highest rate'?

[ringram]

.. if they have a history of regular payments over the last 4+ years. Not many that lucky.

[B0bman]

My point is that, if you are a 40% tax payer and therfore earn less than £150k pa by definition, then you will never be able to obtain 40% tax relief on a contribution that large.

Tax relief on pensions is given by extending the basic rate tax band such that you are only able to obtain 40% tax relief on contributions to the extent that you are actually paying tax at 40%. As a result, someone earning up to £150k pa could not get 40% tax relief on a £200k contribution.