What are 'relevant earnings' for pension purposes?
Subscribers see Pensions: Tax rules and planning
This is a freeview 'At a glance' guide to relevant earnings for pension contribution purposes.
At a glance
Tax relief on pension contributions made by an individual into a qualifying pension scheme is limited to the higher of 100% of their relevant UK earnings or £3,600 per annum.
Contributions are also limited by the Annual Allowance.
The following earnings are relevant UK earnings:
- Income chargeable under Part 2 ITTOIA 2005 immediately derived from a trade, profession or vocation.
- Employment income such as salary, wages, bonus, overtime, and commission providing it is chargeable to tax under Section 7(2) ITEPA 2003
- Any part of a redundancy payment that exceeds the £30,000 tax-exempt threshold under section 403(1) ITEPA 2003.
- Benefits In Kind which are chargeable to tax.
- Profit related pay (including the part which is not taxable)
- Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP) provided it is paid by the employer and chargeable to tax under Section 7(2) ITEPA 2003
- Permanent Health Insurance (PHI) payments paid by the employer whilst you are still in employment
- Salary paid by way of Government Securities
- Remuneration paid in the form of units in an authorised unit trust provided it is treated, on receipt, as a taxable emolument of the individual
- Patent rights treated as earned income under Sch 1 para 473(3) ITA 2007
- General earnings from overseas Crown employment which are subject to tax in accordance with Section 28 of ITEPA 2003
- Amounts deducted from salary to purchase partnership shares in a share incentive plan provided they qualify as such under paragraph 83 of Schedule 8 of Finance Act 2000
Per HMRC this list is not exhaustive, see HMRC pensions tax manual.
Note that no deduction for losses from self-employment is required.
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Pensions: Tax rules and planning
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Pensions: Unauthorised payment charges
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