Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
The limit may be reduced to £4,000 once money purchase pensions are accessed.
Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.
The annual allowance is tapered for those with adjusted income over £240,000. For every £2 of income over £240,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £4,000.
Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.