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Hello.
– Charles is a member of a registered pension scheme since May 2016. He made a gross contribution of £25,000 in the tax year 2016/17 but has not made any subsequent contributions.
“If Charles had made payments of £6,880 into a personal pension scheme during the tax year 2018/19, his personal allowance would have increased by £4,300”
1. Could you explain how the statement above is true as the explanation provided in the kit is not that clear.
2.How can the PA increased? From what I’ve understood, the PA should instead decrease once the ANI limit has been exceeded.
Thanks in advance.
Look at the notes – ANI is after DEDUCTING the gross personal pension contributions.
If Net Income is 111,100 then the decrease in the PA is (11,100 x 50% = 5,550)
If a PPC of 6,880 is made the gross PPC = 8,600 and this will be deducted to derive ANI which will now = 102,500 so the decrease in the PA will be only 1,250.
The PA will be higher by (5,550 – 1,250) = 4,300
The easy way to calculate the increase in the PA is to take 50% of the gross PPC
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