14:38 16 March 2013
If you’ve started funding your pension, you’ll need to understand pension tax relief in UK. At first glance, the whole concept can be overwhelming due to all the information that you need to know. However, once you picked your pension scheme, everything else will be much easier to comprehend.
Here are some of the most important things that you need to keep in mind.
Types of pension plans
Before you can understand UK pension tax relief, you need to understand the types of pension plans first. There are only two; company pension plans and personal pension plans (PPP). In company pension plans, everything is done automatically for you. This means that your contributions for the pension will be automatically deducted. It’s the same process for tax deductions.
How much tax relief
The tax relief that you get from your pension will depend on your taxpayer status. If you’re a basic taxpayer, you are going to get 20per cent tax back on your contributions. Similarly, if you’re a high rate taxpayer, you’ll get 40per cent tax back.
Keep in mind that there is a limit when it comes to pension contributions. If you contribute under the annual allowance, you’ll get as much as 100per cent tax relief.
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