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 and Lifetime allowances.

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, commission providing it is chargeable to tax under Section 7(2) ITEPA 2003
  • Any part of a redundancy payment which 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

Note that no deduction for losses from self employment is required.


Pensions: tax rules and planning

Pensions: tax planning guides (index)

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