I have a client who was previously self employed making personal pension contributions. Unfortunately, his business has proved unsuccessful, and he has now taken on an employed role. Income from his new employment will be £60,000 per annum. He has asked me about higher rate tax and pension contributions and how pension payments will be made. What is the position?

Tax relief is available on contributions up to the higher of 100% of relevant earnings and £3,600 gross. There is no limit to the contributions that can be made, but whether they qualify for tax relief and whether there are effects for the annual allowance charge and the lifetime allowance charge are a different matter.

For employees such as your client, relevant earnings include employment income chargeable to UK income tax which includes benefits. The amount of the relief on the contributions depends on the individual’s marginal tax rate.