Annual Allowance
The maximum amount you can contribute to registered pension schemes each tax year while still receiving tax relief, currently set at £60,000. Contributions above this limit are subject to the Annual Allowance Charge, which effectively claws back the tax relief. High earners may have their Annual Allowance reduced via the Tapered Annual Allowance.
Related Terms
Pension Tax Relief
A government top-up on pension contributions that effectively returns income tax paid on the contributed amount, making pensions a highly tax-efficient saving vehicle.
Tapered Annual Allowance
A reduced Annual Allowance for individuals whose adjusted income exceeds £260,000, with the allowance reduced by £1 for every £2 of income above that threshold.
Carry Forward
A pension allowance rule that lets you use any unused Annual Allowance from the previous three tax years, potentially allowing contributions well above the current year's £60,000 limit.
Salary Sacrifice
An arrangement where you give up part of your salary in exchange for a non-cash benefit such as employer pension contributions, a cycle-to-work scheme, or an electric car.
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