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Higher rate tax relief for pension contributions of non-earners

Higher rate tax relief for pension...
If one earns a salary of £10,000 and makes contribution to a personal pension of £6,000 (including the basic rate tax reclaimed by the pension provider), in calculating overall tax, the basic rate limit is increased by £6,000 as a means of facilitating higher rate tax relief.
However, if one does not earn a salary at all and makes a contribution to a personal pension of £3,600 (including the basic rate tax reclaimed by the pension provider), is the basic rate limit increased by £3,600? Or is there an exception rule that means non-salary earners are not afforded the benefit of higher rate tax relief on such contributions?


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By K81
28th Jun 2012 16:20

To obtain tax relief (extending the basic rate band) on pension payments you need to have "net relevant earnings" this is earned income, not pension or investment income.

I am not aware that legislation has changed on this but if it has I am sure that someone will let me know.

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By ebatch
28th Jun 2012 16:50


Just to clarify, one does not need net relevant earnings to contribute up to £3600 gross- my question relates to such circumstances, and whether the basic rate band is extended under such circumstances in order to afford higher rate relief?

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By vince8
28th Jun 2012 17:26


If you earn £10,000 the basic rate does not need extending. I think you are really confused.

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28th Jun 2012 17:41


It is of course possible to earn £10,000 (or even £0) and still be a higher-rate taxpayer, because of the level of your investment income.

So yes, if you don't have any relevant earnings a make a (net) pension contribution of £2,880 (grossed up to £3,600), then you're entitled to higher-rate (and additional-rate where relevant) tax relief, which is achieved by extending the basic-rate band.

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By ebatch
28th Jun 2012 18:53

Thanks George Attazder. That's what I wanted to ascertain - so higher (and additional) rate relief would be available against interest and dividend income in such circumstances.

Sorry vince8 - definitely not confused.


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