Taxation of pension contributions ― overview

Produced by Tolley in association with

Employment Tax

Guidance

STOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.

Introduction

For many years the UK has operated a system which encourages private pension provision through a system of tax reliefs.

Pensions taxation lifecycle

The taxation life cycle of private pension arrangements can broadly be divided into three stages. At each point there are tax implications for the member and, where applicable, the member’s employer.

Contributions ― payments are made into a fund. These payments are made by the individual members and, in many cases, by their employer as well. If the scheme is funded by contributions from the employer only, it is known as a ‘non-contributory scheme’.

The UK system is based

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