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Relevant earned income tax relief on pension

Pension tax relief

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I currently put in a pension more than my income from earnings. I also receive a small amount of carers allowance. Will the carers allowance amoutn be included for tax releif on my pension payments?

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By Matrix
29th Apr 2018 09:00

The maximum you can pay into a pension is £3,600 or your net relevant earnings so you would not get tax relief on any excess.

If you earn less than £3,600 then there would be no tax on the carer's allowance.

If you are paying tax on the carer's allowance then I don't see how you would qualify in the first place since it is earnings based. Please clarify.

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By carnmores
29th Apr 2018 10:30

I don't understand your first sentence, do we not need to know the amount of earnings?

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By Matrix
29th Apr 2018 10:53

Yes that would be helpful if the OP could provide, together with the pension contributions and any unearned income. I don't understand why any tax would be paid on the carer's allowance though so rather confused.

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By lorraine2105
29th Apr 2018 11:59

Thanks for your replies. To clarify I earn 8k from self employment £3,200 from carers allowance and 12k p.a. from rental income.
I have paid 10k in to a private pension. HMRC state that you can only pay in either the £3600 or 100% of your uk relevant earned income.
I am under the impression that rental income is not classed as earned income but I cannot find anywhere if carers allowance would be included.

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By Adam12345
29th Apr 2018 12:19

This is the least of your worries.

£8k is more than £120 per week. You shouldn't be claiming carers allowance in the first place.

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By Matrix
29th Apr 2018 12:22

Tax relief would then be restricted to £8k gross contributions (I don't think that carer's allowance is earned income under s7 ITEPA for the purposes of relevant earnings but you could research this). I thought you did not qualify for carer's allowance if you earned more than £120 a week though?

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By carnmores
29th Apr 2018 16:07

are unused contributions brought forward a consideration here?

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By Matrix
29th Apr 2018 19:00

Net relevant earnings are still the maximum contribution possible in any tax year. Unused annual allowances do not affect the NRE.

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By carnmores
30th Apr 2018 07:58

thank you Matrix I was under the impression that you could use unused allowances carried forward if you already had a scheme. Time for me to buy a text book Taxcafe's pension magic seems to be the one

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By Matrix
30th Apr 2018 08:02

You can but the max is still restricted by your NRE.

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By catlady
30th Apr 2018 11:23

Just for clarity, to be able to use carry forward, you must pay at least £40k into a pension in the current year before you can use left over allowances from the prior 3 years. The exception is if you are affected by the taper, then you can use left over allowances once you have used your reduced allowance in the year.

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By carnmores
30th Apr 2018 12:06

Thank you catlady i think i get it :-)

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By catlady
30th Apr 2018 13:29

Apologies carnmores, I have been reading up about pension rules recently and got a bit excited that a bit of knowledge had actually stuck!

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By tonycourt
30th Apr 2018 12:26

Sorry catlady, no offence intended, but in context of the OP your post confuses more than clarifies.

Matrix is correct. I'm sure you know this by to "clarify". Pension providers should not accept contributions if they exceed the payer's NRE for the year (although I've seen this point disputed. Plus establishing a contributors NRE can be difficult for pension companies to monitor). Carry forward of tax relief plays no part in this and shouldn't be mentioned in responding to the OP's question.

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By catlady
30th Apr 2018 13:34

tonycourt, no offence taken. The thread was going off on a tangent, not unusually, and I added to it, albeit of no use to the OP.

That said, I did not state anything incorrect, or contradict Matrix concerning the NRE.

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