RE284 - Personal Pension Relief: Relevant earnings

The main sources of `relevant earnings' are

• emoluments chargeable under Schedule E, including benefits-in-kind such as car benefits, car fuel benefits, private health insurance etc received from non-pensionable employment (but not shares received as benefits-in-kind)
• profits from a trade, vocation or profession (carried on as an individual or as a partner in a partnership) chargeable under Schedule D.

The following specific sources of income also count as `relevant earnings'

• post-cessation receipts treated as earned income under ICTA88/S107
• profit related pay (including the part which is not assessable to tax)
• income assessable under Case VI of Schedule D from the commercial letting of furnished holiday accommodation in the UK
• income from patent rights treated as earned income under ICTA88/S529
• enterprise allowance payments chargeable under ICTA88/S127
• income from property falling within ICTA88/S644 (2) (b).

The following sources of income do NOT count as `relevant earnings'.

a) Pensions.
b) Benefits paid by the State whether taxable or non taxable.
c) Earnings from international organisations, for example United Nations, which are exempt from tax by reason of a statutory instrument.
d) Emoluments of a director who is a controlling director of an investment company (an individual is a controlling director if he/she, either alone or together with any other persons who are or have been at any time directors of the company, controls the company. `Controls' should be construed in accordance with ICTA88/S840).
e) Lump sums chargeable under ICTA88/S148, such as `golden handshakes' on termination of employment.
f) Anything in respect of which tax is chargeable under Schedule E and which arises from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares.
g) For 1989-90 onwards, the emoluments of a director who is (or has been within the last ten years) a controlling director and receives a pension in respect of employment with that company or its predecessor (either from an occupational pension scheme or from a personal pension scheme to which those benefits were transferred).
h) For 1989-90 onwards, foreign emoluments if

(that is the treatment of foreign emoluments now matches those of ordinary UK earnings.)

SPECIAL NOTE

The calculation of `relevant earnings' will generally be the same for both PPR and RAR. However, items e. to g. do not apply to retirement annuities and in some cases you will have a different figure for `relevant earnings' depending on the type of contract to which the contributions are being made.