Contributing to your pension over the Annual allowance

Hi everyone,

I am aware of the annual allowance, tapering, carry forward etc...

I am just getting my head around what is stopping someone making a large lump sum contribution to their pension (say £500,000), get the tax relief on what they can and then get no relief on the rest? Assuming their is no LTA issues and without knowing the implications beyond this, it seems to me that someone could do this as a way of getting money out of their estate for IHT purposes?

What am i missing here?

Thanks

Wild

Comments

  • Do they have the earnings to justify a £500K contribution?

  • And if they can make it as an employer, wholly and exclusive rules?

  • JonaJona Member

    In theory yes @Wildcherry

    But on the value above BR relief they will pay 40% or 45% AA charge (and assuming no LTA issue) then this is the same as or worse than 40% IHT.

    If they then die past age 75 (probable if in average health) any beneficiary drawing on the funds will also pay tax at their marginal rate 0, 20, 40, 45%

    So some of the contribution could attract 90% tax.........

  • @Wildcherry said:
    Hi everyone,

    I am aware of the annual allowance, tapering, carry forward etc...

    I am just getting my head around what is stopping someone making a large lump sum contribution to their pension (say £500,000), get the tax relief on what they can and then get no relief on the rest? Assuming their is no LTA issues and without knowing the implications beyond this, it seems to me that someone could do this as a way of getting money out of their estate for IHT purposes?

    What am i missing here?

    Thanks

    Wild

    Individuals have never been able to do that, under "old rules" an employer, and especially a company, could fund a new shcme for prior service on the very last day, I did that once with a SASS, about 900K with a two year spread for CT, no more I'm afraid. It was effective for IHT up to a point as the cash wouldn't have (most likely) received BPR.

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