Are Pension Contributions Taxable? Employment

Private pension contributions are tax-free up to certain limits.

The following private pension schemes are non-taxable –

  • Workplace pensions
  • Personal and stakeholder pensions
  • Overseas pension schemes that qualify for UK tax relief. We would recommend consulting your pension provider to ask if it is a ‘qualifying overseas pension scheme’.
  • Pension schemes need to be registered with HMRC to qualify for tax relief. Check again with your pension provider if you are unsure if your scheme is registered or not.

You will be eligible to pay tax when you take money out of a pension.

Are there limits to your tax-free contributions?

You will typically pay tax if savings in your pension pots go above the following –

  • 100% of your earnings in a year – this is the limit on tax relief you get
  • 40,000 a year – check your ‘annual allowance’
  • £1,073,100 in your lifetime, otherwise known as your lifetime allowance

You will also pay tax on contributions if your pension provider is not registered for tax relief with HM Revenue and Customs or does not invest your pension pot (according to HMRC’s rules).

Explaining Workplace Pensions, Automatic Enrolment and Tax Relief

All employers are now required to enrol all eligible workers automatically into a pension scheme. This requires a minimum total contribution, made up of the employer’s contribution, the worker’s contribution and the tax relief.

Need More Advice? Get in touch with BBO

If you have any questions about taxable pension contributions, please do not hesitate to contact BBO today. We are a lottery-funded organisation committed to providing financial advice and employment support to people across Stafford and South Staffordshire. To take advantage of our services get in touch or attend one of our drop-in sessions. Advocates from BBO would be happy to hear from you and assist in any way they can.