Chapter 26 - Pension Schemes Flashcards
What are the main ways of providing funds for retirement?
Personal pension schemes & occupational pension schemes
True or false
Registered pension funds pay income tax & capital gains tax
False
Registered pension funds grow tax free
If an individual draws from their pension fund, what % of the amount draw up to what amount is tax free?
25% up to a max of £268,275
What is the maximum gross contribution qualifying for tax relief that a taxpayer can make into a pension scheme each year?
The higher of -
100% of their relevant earnings for the tax year
£3,600
What does ‘relevant earnings’ refer to regarding pensions?
employment income, trading income, & income from furnished holiday lets
How do you calculate basic rate relief at source?
amount x (100/80)
How do you extend the basic & higher rate limits?
For example -
37,700 + (contribution x100/80)
True or false
Relief on amounts contributed to ‘occupational pension schemes’ is given under net pay arrangements whereby PAYE is applied to salary after pension has been deducted
True
What is the annual allowance for 2024/25?
£60,000
How is unused allowance treated?
The allowance for the current year is increased by any unused allowance from the previous 3 years in a FIFO basis
How is the annual allowance treated for high income individuals?
It is tapered where the threshold income exceeds £200,000 and adjusted income exceeds £260,000
How is the tapered annual allowance calculated?
Divided by 2 - cannot be reduced to less than £10,000
How is the annual allowance charge calculated?
(total pension inputs - annual allowance) @ rate of tax
How do you calculate the defined contribution scheme pension input?
Total contributions eligible for relief + employer contributions
