Tax relief
Every payment you make into a pension plan that is within the annual allowance limit (£245,000 for tax year 2009/2010 - see Stakeholder - 'How much should I save?') is entitled to tax relief - normally at your highest rate. For basic-rate taxpayers and for those who do not pay tax, the tax relief is automatically added to your payments.Example of tax relief for basic-rate taxpayers and those who do not pay tax:
For higher-rate taxpayers, basic rate tax relief is automatically added to your payments. You'll need to reclaim the extra tax relief through your tax return. If you earn over £130,000 a year, you should also read about the recent tax changes to pension plans announced in the 2009 budget.
Example of tax relief for higher-rate taxpayers:
Important information:
- Tax and legislation are likely to change in the future. The information given here is based on our current understanding of law and HM Revenue & Customs practice.
- Tax relief may alter and its value depends on your financial circumstances.
- The examples of tax relief shown above are based on a personal pension arrangement.
- Your pension in retirement will be taxed as earned income.
