Employer v’s Employee Pension Payments (Net Relevant Earnings) 9

Currently the maximum pension payments allowed per year are £50,000 this for Employee and Employer payments, however, if your net relevant earnings (NRE) are below £50,000 your personla payments will be capped at the higher of your employment income or £3,600. (Carry Forward may be available)

NRE excludes Dividends and if your personal pension payments exceed the NRE then you will need to declare the over payment on your self assessment return and pay tax on it.

This can be a big issue for company directors-shareholders who often take a large part of their income in dividends.

The solution to this is for the company to make employer contributions. Employer contributions count towards the £50,000 limit but are ignored for the NRE cap.

The attached link is useful article on this subject


But there are further explanation on Accountingweb, Skandia, Indicator Tips & Advice Tax (4 October 2012)



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  4. Steve, this and other articles you have written are extremely helpful but could I ask for clarification on one point? In the first paragraph you say “Carry Forward may be available”. Is this a reference to annual allowances, which I know can be carried forward, or does it suggest NRE may be carried forward where NRE in the current year is less than the annual allowance? I certainly haven’t heard of this being allowable but, given HMRC doesn’t always make these things particularly visible, it might be.

    I have now signed up to email updates on your blogg – thanks again for all the useful information you provide.

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