Pension tax relief
A pension is a great way to save and invest your money for the future because you can get tax relief on the payments you make to your pension pot.
This means that the government adds 25% to any amounts you put in, up to a certain limit. This limit is based on your annual earnings and is usually capped at £40,000. You can also carry forward unused allowances for up to three years.
One of the great things about a Nutmeg pension is that we’ll automatically add the 25% government top-up as soon as you make monthly payments into your pension pot.
If you’re a higher or top rate taxpayer and able to take advantage of the higher tax relief, you can claim these additional amounts through your annual tax return form.
|If your income tax bracket is||And you contribute||You will get tax relief of|
|20%||£80||£20 paid into your pension|
|40%||£80||£20 added to your tax-free allowance next year plus £20 into your pension|
|45%||£80||£25 added to your tax-free allowance next year plus £20 into your pension|
There is also a lifetime allowance of £1,055,000 for pensions. This is the upper limit on pension benefits you’re allowed to receive before you have to pay tax. Any amount above this is subject to a charge of 25% if paid as a pension or 55% if paid as a lump sum.