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Cap on pension contributions, personal or employer

My heart sank when a I got a call from a client, who pays himself £8,000 salary, telling me his IFA has suggested he makes an employer pension contribution of £40k before 5 April

I don't pretend to be a specialist in this area, so I wanted to refer both myself and him to a table that would show caps and limits of what was and wasn't possible on a personal and/or employer basis. I have searched but can't find anything suitable even on the Pension Advisory Service website. Can anyone offer a link or assistance?

Edit - I am aware of the £50k annual allowance, that tax relief is limited to 100% earnings, but not sure about was 'earnings' means or the practical implications of exceeding earnings while staying under the annual allowance cap.


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22nd Mar 2012 17:25

Should be ok

As long as it is an employer contribution and not a personal contribution (in which case it would be limited to salary so tmax contriution would be £8,000).

As it is an employer contribution, max would be £50k (plus any unused relief for the last 3 years - up to £50k pa).

HMRC, if they look at anything at all,  will look at salary plus ension contribution as a whol;e package to determine if this is reasonable as a slary for him - but if it is his own company, I can't really see how anything could be too much),

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23rd Mar 2012 00:14

My thoughts go to the advice that

 a pension contribution of that level is appropriate at how much commission does that pay..............hmmmm

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Commercial package

So, for an employer's contribution the salary is irrelevant and HMRC are only concerned about the total package being commensurate, subject to the £50k cap? 

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24th Mar 2012 12:01



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26th Mar 2012 11:32

Taxhound is correct. Best source for official confirmation is HMRC Business Income Manual at BIM 46035.

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