Ch 9: Pensions Flashcards
What is the impact on the INDIVIDUAL for a occupational pension scheme?
The contribution is deducted from individuals gross salary (still subject to NIC)
What is the impact on the EMPLOYER for a occupational pension scheme?
This is an allowable deduction when calculating taxable trading profits
What is the impact on the INDIVIDUAL for a personal pension scheme?
- HMRC gross up the individuals by 20% (this gives the gross contribution paid by the individual 100/80)
- The individual extends his bands by the gross contribution
What is the maximum tax relievable pension contribution?
The higher of:
- earnings
- £3,600
- no relief will be given on contributions in excess of this limit
What is the annual allowance and who qualifies for it?
£40,000 for those part of a pension scheme
When is the annual allowance tapered?
When the individuals threshold income > £110,000, down to a minimum tapered allowance of £10,000
What 5 steps do you follow for pensions?
- Check net relevant earnings - only give tax relief on contributions less than this
- Calculate IT giving relief
- personal pension x 100/80 & extend BR and HR bands
- occ pension deduct from EI - Consider annual allowance
- If threshold income > £110,000 it will need tapering (using the tapering calc).
Take the tapered allowance + any unused from previous 3 years - Take pension contributions, less annual allowance from 3 = excess
- Take the excess to last part of IT calc & tax as last piece of income being taxed
What is the tapering calc?
Tapering £40,000
1/2 (Adj inc - £150k) (x)
= £10,000 - can’t be any lower
How do you calculate the adjusted income figure if EMPLOYEE?
NSI + SI + DI x
employee contribution x
employer contribution x
How do you calculate the adjusted income figure if SELF EMPLOYED?
NSI + SI + DI x
When does the annual allowance charge apply?
If the total gross contributions exceed the available annual allowance
- taxed at the individuals tax rate and added to the IT liability
