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(10) During the year 2018/19 Dill contributed the maximum possible tax relievable amount into H Plcs HMRC registered money purchase occupational pension scheme. Dill was not previously a member of pension scheme. Company made no contributions on her behalf.
– Dill’s gross salary £270,000
therefore ANI > 210,000 so AA reduced to £10,000Q> this is to find employment income, and then income tax liability. The answer subtracts occupational pension contribution by £10,000. i.e (10,000) amongst the other components for employment income.
How did they get £10,000 occupational pension contribution? I think it has something to do with the fact that Dill’s gross salary exceeds £210,000 but I thought a different rule applied which is the lower of:
1. total gross pension contribution paid (not given in question)
2. maximum annual amount
– higher of £3,600 and 100% of relevant earnings (which is not 10,000)Please help me clarify the confusion.
thank you.
1) The question states:
“Dill contributed the maximum possible tax relievable amount into H Plcs HMRC registered money purchase occupational pension scheme. Dill was not previously a member of pension scheme. Company made no contributions on her behalf.”
The “maximum possible tax relievable contributions” are not only limited by the “maximum annual amount” that you quote above but also by the annual allowance – see OT notes chapter 10 section 2 page 64 where you will see it stated that a person with adjusted income in excess of £210,000 (as is clearly the case here) has the minimum AA allowed of 10,000. There is no unused AA b/f to increase this amount as Dill was not a member of a pension scheme in any of the previous 3 tax years.
Therefore the maximum TAX RELIEVABLE contributions is 10,000.
2) Occupational pension contributions paid by an employee are allowable deductions in deriving the employment income assessment.so in this instance as their AA is 10,000 and they do cannot bring any unused AA forward even if there was any, since they were not a member of a pension scheme before, they are restricted to 10,000. This is because that is lower than their maximum allowance which is the higher of 3600 and relevant total income, which in this case, the maximum allowance would be relevant income, which is clearly higher than than AA of 10,000. Hence restricted by AA rathe than maximum allowance.
-Great thank you very much
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