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Annual Allowance

The Government has set a limit on the maximum amount of contributions that can be made to registered pension schemes each year to receive tax relief. This is called the Annual Allowance. The Annual Allowance for the 2007/08 tax year is £225,000. The Government has set the Annual Allowance for the next three years as follows:

Tax YearAnnual Allowance
2008/2009£235,000
2009/2010£245,000
2010/2011£255,000

Any future increases will be announced by Treasury Order.

If the total of personal and company contributions exceed the Annual Allowance in a particular tax year, then a tax charge of 40% will apply to the excess.

There are two circumstances where the Annual Allowance will not apply to contributions. These are:

  • Contributions made in the year you take all of your benefits
  • Contributions made in the year you die.