If you are making a personal pension contribution (rather than a contribution from a Ltd Company) You can contribute any amount up to your Relevant UK earnings for the tax year of the contribution.
What are relevant UK earnings?
In short this is:
– employment income
– self-employed income
– income from patent rights
– certain redundancy payments
– earnings from overseas crown employment
This means that salary counts as relevant UK earnings BUT Investment income and dividends don’t.
If you have no earnings then the maximum amount is £3,600 (However, this is a gross amount – you would only pay £3,600 X 0.8 = £2,880)> The remaining £720 is paid by the Government directly into the pension.
There is no minimum age to open a pension account but a legal guardian is required to sign on behalf of an account holder who is under age 18.
If you wanted to pay into a pension for children or grandchildren you could pay in £2,880 net and receive tax relief to the pension if they have no earnings of their own.
You are allowed to pay in £40,000 Gross (£32,000 net) per year to your pension but only if you have £40,000 relevant earnings.
ie if your relevant earnings were £25,000 Gross (£20,000 Net) then you could only contribute £25,000 in the tax year even though the allowance is £40,000.
Claiming Previous Years Unused Allowances
If you have not paid contributions (or less than the allowance) in the previous 3 years you could pay the remaining balances from those years also within the current year ie more than the £40,000 allowance (However still not more than your current years earnings)
Ie if you earned £70,000 in this tax year and had not used any of the previous years allowances then you would be limited to pay this years allowance of £40,000 Gross (£32,000 Net) + £30,000 Gross (£24,000 net) from previous years.
Similarly if the children have no earnings you could pay in 4X £2,880 = £11,520 Net using this years and the previous 3 years allowances – The Government would then add a further £2,968 to the pension.
You can only claim previous years allowances if there was a pension vehicle available for you to pay into during those previous years.
2022/23 – Current Year £40,000 – must be filled before using previous years– Lost at 5th April 2026
2021/22 – £40,000 less any payments made – Lost at 5th April 2025
2020/21 – £40,000 less any payments made – Lost at 5th April 2024
2019/20 – used first if using previous years – Lost at 5th April 2023