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Join UsCall UsPension tax rules allow tax relief on contributions up to certain limits, helping individuals save for retirement efficiently.
Most pension income is taxable when it is taken, although up to 25% can usually be withdrawn tax free.
Annual and lifetime limits apply, and tax charges may arise if these limits are exceeded.
| 2023/2024 | 2024/2025 | 2025/2026 | 2026/2027 | |
|---|---|---|---|---|
| Annual allowance 100% of salary up to .. (1, 2) | £60,000 | £60,000 | £60,000 | £60,000 |
| Money purchases scheme annual allowance | £10,000 | £10,000 | £10,000 | £10,000 |
| Permitted gross contribution (irrespective of salary) | £3,600 | £3,600 | ||
| Lifetime allowance | No lifetime allowance charge (3) | No lifetime allowance charge (3) | No lifetime allowance charge (3) | No lifetime allowance charge (3) |
| Annual allowance 100% of salary up to .. (1, 2) | 19-47% | 19-48% | 19-48% | 19-48% |
| Tapered annual allowance threshold (applies to income including pension contributions over this threshold) (5) | £260,000 | £260,000 | £260,000 | £260,000 |
| Net income threshold (5) | £200,000 | £200,000 | £200,000 | £200,000 |
[1] Unused relief can be brought forward from the previous three years and used after the current year allowance.
[2] Restricted for all defined contribution schemes from the tax year after pension funds have been flexibly accessed.
[3] For 2023/24, no lifetime allowance charge will arise, but the lifetime allowance legislation will remain on the statute until Finance Act 2024.
[4] Levied at the individual’s highest marginal income tax rate, in England and Wales either 20%, 40% or 45%. Scottish taxpayers pay the charge at their highest Scottish income tax rate, either 19%, 20%, 21%, 41%, 42%, 45%, 46%, 47% or 48%.
[5] From 2020/21, the annual allowance is reduced by £1 for every £2 that adjusted income exceeds the threshold, up to a maximum reduction of £36,000 (£50,000 from 2023/24). Where net income is below the net income threshold, the taper will not normally apply.
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