Maximum Contributions Allowed

This is fairly generous for most individuals.  The maximum is £120,000, representing the previous three income tax years, plus the current year’s allowance.

For high earners, those with total taxable income above £210,000 in the current tax year, special rules apply (click here) .

Therefore, the maximum contribution for any UK resident individual is £160,000 in a single tax year, provided their annual salary is at least £40,000, or if not then the contributions above total annual salary are paid by their Employer.

From the above maximum must be deducted the total contributions already made in the same tax years.  Table 3 below shows a worked example.

Table 3 – maximum pension contributions

The above Table 3 shows that the Member would be able to invest an additional £130,000 as the maximum contribution available in the current tax year.

The HMRC rules state that the current year AA is first used and then that unused for the oldest of the last three tax years, coming forward up to date until fully used.

Therefore, should an additional salary exchange contribution of, say, £60,000 be made, based upon the above calculations the 2018-19 tax year would see £24,000 of the unused AA utilised and the balance of the contribution use up the whole of the current 2021-22 tax year’s AA amount.

Please contact the Scheme Advisers at Patterson-Mills for further advice in making these calculations, this service is paid for by Currencycloud as part of the service to Members.