- This topic has 3 replies, 2 voices, and was last updated 1 week, 6 days ago by
.
- Posts
- June 18, 2020 at 6:44 am
Sir if there’s an unemployed person, assuming his relevant earnings(RE) are 0 so for him tax relievable amount would be higher of RE and 3600pounds, which is of course the latter. So, now let’s say the individual is contributing 5000pounds towards his personal pension contribution. Here my doubt is, the excess of 5000-3600=1400 should still be tax relievable for the individual as long as it is within 40,000 limit of annual allowance, right sir??
June 18, 2020 at 6:31 pmSorry but no – as the taxpayer has no relevant earnings tax relief will be given on £3,600 and of course as £3,600 is well within the AA limit of £40,000 the full £3,600 will qualify for tax relief but only the £3,600.
If the taxpayer has relevant earnings of £100,000 then he/she could make a contribution of £100,000 BUT if this amount then exceeded the AA limit of the current year plus any unused AA b/f from the previous 3 years then an AA charge would arise on this excess.June 20, 2020 at 5:46 amsir i understand that the individual will get basic rate tax relief at 3600 pounds only as it is the higher of relevant earnings(0) and 3600threshold, and subsequently the HMRC will pay 3600*20%=720. the remaining of 5000-720=4280 will be paid by the individual. But my question is, on the 5000pounds or any portion of it, is the individual liable to pay taxes at the highest marginal rates of tax? my assumption is no, because 5000pounds of gross contrn does not exceed the annual allowance of 40000pounds.
Can you now throw some light?
You must be logged in to reply to this topic.