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KB Home / Tax Return Production / SA100 Individual Return / Difference between tax relief on Pension Contribution and Annual...

Difference between tax relief on Pension Contribution and Annual allowance

Article ID: 2667
Last updated: 02 Aug, 2023

If you receive an error message in regard to pension contributions, and you have made pension contributions to use up your annual allowance, the difference can usually be explained.

Tax relief on pension contributions

  • Tax relief on pension contributions is restricted to £3,600 or net relevant earnings, whichever is higher.
  • Pension contributions result in a reduction of tax due. (If you are a higher rate tax payer)
  • If an individual makes pension contributions above the net relevant earnings (or £3,600, if this is higher), TaxCalc displays a Check & Finish validation message.

Further information on this can be found here: Error message: Tax relief is not available for pension contributions in excess of £3,600 or net relevant UK earnings.

Annual allowance

  • The annual allowance determines whether individuals should be charged the 'tax charge', based on how much they have contributed into the pension pot in the tax year.
  • If individuals contribute in excess of the annual allowance (plus brought forward allowances, if any) then the excess contributions would be subjected to a 'tax charge'.

Further information on annual allowance can be found in the HMRC guidance on Annual Allowance.


 

Article ID: 2667
Last updated: 02 Aug, 2023
Revision: 16
Views: 1287
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