Philip Warren says... | 01 Feb 2011

There is some talk of higher rate tax relief being removed from pension contributions. As ever, this rumour tends to circulate at budget times most years but in these chastened times, there may be perhaps more validity than usual!

An opportunity exists for both 40 and 50% tax rate payers to offset up to £200,000 gross pension contribution…. An opportunity almost too good to miss. For those who have contributed less than £50,000 to their pension pot (both employer and employee) in this and each of the past three years, they have the opportunity to ‘top’-up’ the shortfall to £50,000 for the four years, or up to £200,000, and claim tax relief at their marginal rate of tax of up to 50% for so long as their earnings can justify it in the current financial  year. For example, if an individual has earned income in the current year of £250,000 and has contributed £10,000 to their pension plan this year and each of the three past years, they could contribute a further £160,000 and claim up to 50% tax relief. This may prove a unique opportunity.